Which "death blow" is more definitive? An apt description from Scott Sumner, re an important difference between the negative shock and the monetary response.
For time arbitrage, ongoing experimentation with skills capacity and time preferences would be part of the process. Participants would match (their mutually sought) time priorities across a diverse range of skill levels, with as many different individuals as possible. The more options for mutual employment any individual has in the long term, the more security one might maintain for social connections as they age. Equally important, is that diversity in one's offerings to others, is one of the best means by which to preserve personal autonomy. Nevertheless, experimentation does not come naturally to us, for we tend to be set in our ways and habits. An article from the NYT explains why.
"An oligarchic democracy may be worse for the poor than an arbitrary government."
"The money was supposed to go toward buying a legendary music studio..."
Is high productivity associated with low employment?
"Asset prices and macroeconomic outcomes."
Scott Sumner has reservations re a Cowen/Tabarrok video
What was bitcoin supposed to be able to do?
"Endogenous Technological Change" (Paul Romer) and, again, "The Trouble With Macroeconomics"
"The facts are that a widening trade deficit, or more importantly, rising US imports, is associated with greater nominal GDP growth."
"Inadequate Equilibria: Where and How Civilizations Get Stuck"
For now, higher budget deficits.
Perhaps the flaw in modern macro is that "the efficient markets hypothesis is not deeply embedded into all of our models."
A most useful course on "Nobel Prize-Winning Contributions to Economics"
"Is It Better to Learn From People or From Books?"
What explains the decline in labour costs?
The University of Pennsylvania has an online books page for books that are freely available.
A recent study shows the close link between health care spending and lobbying by interest groups.
Hospitals are moving quickly to preserve their revenues.
Since 2014, Yellen has "seen fit to end QE and raise interest rates repeatedly".
"When it comes to urban density, we're not all goldilocks. We don't all want the same porridge."
This would be an important defined equilibrium consideration for any group that seeks to identify - via their own terms and capacity - the extent of local non tradable activity that is (reasonably) possible through mutually held time and resources. Both in the sense of physical environment, and time preferences for given sets of mutual responsibilities and benefits. No debt formation necessary.
Likewise...
"Communal-mode interpersonal skills may become increasingly important to life success - not less, as techies hope."
Baumol's disease, intangibles, path dependence, incentives and anti-intellectual prejudices could all eventually lead to regress.
the cascading effects of poor productivity: "The Network Origins of Aggregate Fluctuations"
"The safe asset shortage, the rise of mark-ups, and the decline in the labour share"
James Pethokoukis interviews Brink Lindsey and Steve Teles re their new book. Also, their interview with Russ Roberts.
When history is abused, it flattens the complexity of human experience.
"It's the first time I have noticed a persistent spread between inflation in one area and the rest of the country..."
Are the young subsidizing the old?
Some simple ways to think about models.
An AEI interview with Hal Varian
Bill Niskanen preferred a target path for total (final) demand.
The U.S. dollar has multiple roles in the global economy.
Scott Sumner has a simple but important message re inflation, for U.S. News.
Nick Rowe explains the natural rate of interest.
Sweden offers an interesting historical example of monetary experimentation in action, which also illustrates the quantity theory of money.
Alex Tabarrok takes a look at the sectoral approach He also highlights this recent paper, "The Macroeconomic Impact of Microeconomic Shocks: Beyond Hulten's Theorem" which is part of a notable research list for 2017
The rise of intangibles plays a large role. "Investmentless Growth: An Empirical Investigation"
Sunday, December 31, 2017
Saturday, December 30, 2017
Intentional Dynamics: Claims on Wealth Change Its Structure
Does it matter whether intentional claims on wealth are of public or private origin? Sometimes, neither public or private interests are willing to support marketplace access, and both have become engaged in the design of strategies which discourage full economic participation. Equally important, is that today's requirements for economic participation, have become a major contributor to excessive debt formation.
Only consider how these marketplace requirements presently play out, as Washington "helps" citizens (via subsidies) to engage in the production and consumption of a wide range of arbitrarily limited activities. According to the IMF (from a recent WSJ article), while U.S. debt as a portion of GDP was 93rd out of 169 nations in 2001, the U.S. is in fifth place among large countries today, for debt as a portion of GDP. That's a dramatic change in wealth structure, and one that citizens need to actively change, towards wealth creation which can be reciprocated at the outset.
Meanwhile, differences between wealth claims and wealth origination in general equilibrium, aren't well understood. While reading a post from Tim Harford, "Could We Run the Economy With an App?" I noted that no equilibrium algorithm would be able to take crucial supply and demand differences for aggregate wealth, into account. Still: Why should such important matters be left to algorithms in the first place?
Harford explains that when socialist calculations were being debated earlier in the 20th century, policy makers lacked the computer power to assist their data collection. Of course this didn't stop economists and central planners from imagining the economy as a "series of simultaneous equations for supply and demand". Harford writes:
If today's hierarchical and expensive patterns of social organization weren't enough, many of these service centered activities occur as wealth capture, instead of wealth creation. Fortunately, citizens have an opportunity to think differently about these processes in the near future. Our personal priorities can't safely be left to impersonal supply and demand algorithms which are mostly built to capture wealth. Fortunately, we have the chance to build wealth anew, based on the aspirations and challenges we might experience in the scarce time we actually have. Given the level of debt the U.S. is already experiencing, one can only hope that new means of wealth creation aren't postponed for too long.
Only consider how these marketplace requirements presently play out, as Washington "helps" citizens (via subsidies) to engage in the production and consumption of a wide range of arbitrarily limited activities. According to the IMF (from a recent WSJ article), while U.S. debt as a portion of GDP was 93rd out of 169 nations in 2001, the U.S. is in fifth place among large countries today, for debt as a portion of GDP. That's a dramatic change in wealth structure, and one that citizens need to actively change, towards wealth creation which can be reciprocated at the outset.
Meanwhile, differences between wealth claims and wealth origination in general equilibrium, aren't well understood. While reading a post from Tim Harford, "Could We Run the Economy With an App?" I noted that no equilibrium algorithm would be able to take crucial supply and demand differences for aggregate wealth, into account. Still: Why should such important matters be left to algorithms in the first place?
Harford explains that when socialist calculations were being debated earlier in the 20th century, policy makers lacked the computer power to assist their data collection. Of course this didn't stop economists and central planners from imagining the economy as a "series of simultaneous equations for supply and demand". Harford writes:
But the power of computers is growing far more quickly than economic output. Could we build an app to run an economy...? The idea has resurfaced in the writings of two Chinese economists, Binbin Wang and Xiaoyan Li. Wang and Li argue that modern computers make it possible to optimise production in real time, personalised to the needs of citizens. In some ways this has already happened.He cites some of the more obvious algorithm examples. Clearly, platforms such as this can be problematic, regardless of who controls them:
One enduring obstacle is tacit knowledge. A textbook economy of supply and demand curves is, in principle, the kind of system that can be understood mathematically. But as Friedrich Hayek argued in 1945, there is a great deal going on in any economy that cannot be counted or even described.
Decisions to produce, to consume, and to take a risk trying to create something new, are all taken with the knowledge of "particular circumstance of time and place". Wang and Li believe that big data make this once-tacit knowledge explicit; I am not convinced.Nor am I. Harford emphasizes how big data can give the wrong incentives to both public and private interests. To some degree, hierarchical patterns which make claims on our scarce time, will always necessary for the organization of complex forms of tradable sector product. Such patterns never should have been necessary, however, for the ways that people opt to spend their time in experiential circumstance with others. The fact society imposes countless rules on personal discretion, and that too many of us are already judged as incapable of personal responsibility, is beginning to dehumanize us all. These are patterns which - such as Hayek described decades earlier - individuals should have adequate means to discover for themselves.
If today's hierarchical and expensive patterns of social organization weren't enough, many of these service centered activities occur as wealth capture, instead of wealth creation. Fortunately, citizens have an opportunity to think differently about these processes in the near future. Our personal priorities can't safely be left to impersonal supply and demand algorithms which are mostly built to capture wealth. Fortunately, we have the chance to build wealth anew, based on the aspirations and challenges we might experience in the scarce time we actually have. Given the level of debt the U.S. is already experiencing, one can only hope that new means of wealth creation aren't postponed for too long.
Thursday, December 28, 2017
Post Highlights from 2017
Since there was an overall increase in page views starting about midyear, and I wanted a fair representation of the full year, a bit of guesswork is involved as to post favorites.
Market Position Matters, for Output Potential Why would policy makers subsidize demand, even as they cooperate with private interests to restrict supply for the same product? Often the market position of the specific sector (primary or secondary), provides clues. Whereas advanced economy government subsidies once supported tradable sector activity which benefited from expansion, today's most likely beneficiaries of government subsidies (non tradable sectors) don't necessarily benefit from marketplace expansion.
Notes on Investment vs Consumption Outcomes How could we do a better job of visualizing human capital in terms of marketplace options? How to reconsider time based product which does not benefit from gains in scale, so that it might become simpler to quantify?
Jobs Are Also a Cost. How to Respond? Expanded job opportunities are logical when they follow new wealth creation. Nevertheless: When market observers accuse governments of being illogical in hiring that doesn't generate new wealth, are the same observers also cognizant of missed potential for new wealth which could be reducing employment potential? Fortunately, new platforms for wealth creation are possible, so that individuals do not always have to wait for other institutions to make the first move. Time as an economic unit, can function as a commodity in the form of coordinated mutual employment. Workplace participation could ultimately be restored at community levels by making it possible for everyone to bear mutual responsibility for job costs, via the opportunity costs of their own time use preferences.
What if Governments Owned the Robots? Much of today's automation is associated with procedures which reduce costs rather than increasing output. Consequently, automation (or robots) doesn't always lead to the increased output which would be necessary for further redistribution. Instead, more of today's automation benefits accrue to the (robot augmented) income of high skill service providers. Indeed, this wealth source is hardly what most people envision, when they discuss robot taxation or consider government supported robot ownership. Alas, productivity is no longer a simple matter of increased output.
Aggregate Time Value: Demand, Supply, or Both? Granted, we need economic participation to be possible on more productive terms than is presently the case. And there will be times when we need to split the difference on how productivity is conceptualized, depending on the institution. Nevertheless, should our institutions allow us to lose too much aggregate time value in the form of supply, we cannot expect to maintain the economic stability of aggregate demand, indefinitely.
"Equal" Income Presupposes Abundance. Equal Time Value, Scarcity Income based approaches to inequality, don't get at the underlying problems of our actual time scarcity, in relation to what non tradable sectors and governments expect of us. One approach to inequality, would be for those with limited incomes to contribute to non tradable sector activity outcomes, via the time they actually possess.
Time Value in Relation to Total Factor Productivity During historical moments of tradable sector expansion, it's often possible for societies to coordinate economic participation, based largely on the new wealth that is being generated. But once the monetary flows of non tradable sector activity begin to dominate, that creates excess demands on existing wealth. Hence societies may need additional means to generate wealth as a point of (reciprocal) origin. Economic time value - given today's high levels of human capital investment - is an obvious choice.
Why Are Normative Healthcare Arguments So Confusing? Too much healthcare discussion takes place as though supply side limits were not actually in effect. How does one redistribute from a supply side which is constrained at the outset? Over the years, recurring discussions as to what "should be" (at the microeconomic level), have been squelched via legislation. And many of these earlier efforts are already forgotten, once normative arguments resume in a broader societal context.
Deep Learning in a Time of Increasing Automation We can't expect to continue deep learning as a "race against the machine". Yet the deep learning we continue to embrace, needs a stronger economic context in terms of personal experiential value.
Only 25% Can Support Non Tradable Sector Requirements Why isn't this growing discrepancy more obvious? Some of it is hidden by debt and financial structures which smooth non discretionary consumption capacity. Nevertheless: Useful though our financial tools have been, they can't fill the gaps between institutional expectations and actual income capacity for the long term. Before any society can expect to meet its infrastructure maintenance needs, it has to make certain its aggregate income capacity and non tradable sector requirements are reasonably well aligned.
Medicare Cutbacks? No Rationale for Monetary Tightening Even though healthcare in the U.S. lacks full marketplace capacity, this sector is far from ready to accept limitations in revenue capacity (note recent hospital consolidations). Yet central bankers have been too quick to use Washington gridlock re healthcare policy, as yet another judgement call to reduce overall monetary representation.
Can General Equilibrium Wealth Become "Overfished"? Up to a point, the secondary market activities of asymmetrically compensated time, government redistribution, credit formation and financial instruments can work alongside tradable sector wealth to define general equilibrium. However, if these forms of wealth capture are excessively preferred over new wealth generation that is free of debt or redistribution, the common pool of circulating revenue may experience greater demand from all participants than central bankers are willing to accommodate.
Market Position Matters, for Output Potential Why would policy makers subsidize demand, even as they cooperate with private interests to restrict supply for the same product? Often the market position of the specific sector (primary or secondary), provides clues. Whereas advanced economy government subsidies once supported tradable sector activity which benefited from expansion, today's most likely beneficiaries of government subsidies (non tradable sectors) don't necessarily benefit from marketplace expansion.
Notes on Investment vs Consumption Outcomes How could we do a better job of visualizing human capital in terms of marketplace options? How to reconsider time based product which does not benefit from gains in scale, so that it might become simpler to quantify?
Jobs Are Also a Cost. How to Respond? Expanded job opportunities are logical when they follow new wealth creation. Nevertheless: When market observers accuse governments of being illogical in hiring that doesn't generate new wealth, are the same observers also cognizant of missed potential for new wealth which could be reducing employment potential? Fortunately, new platforms for wealth creation are possible, so that individuals do not always have to wait for other institutions to make the first move. Time as an economic unit, can function as a commodity in the form of coordinated mutual employment. Workplace participation could ultimately be restored at community levels by making it possible for everyone to bear mutual responsibility for job costs, via the opportunity costs of their own time use preferences.
What if Governments Owned the Robots? Much of today's automation is associated with procedures which reduce costs rather than increasing output. Consequently, automation (or robots) doesn't always lead to the increased output which would be necessary for further redistribution. Instead, more of today's automation benefits accrue to the (robot augmented) income of high skill service providers. Indeed, this wealth source is hardly what most people envision, when they discuss robot taxation or consider government supported robot ownership. Alas, productivity is no longer a simple matter of increased output.
Aggregate Time Value: Demand, Supply, or Both? Granted, we need economic participation to be possible on more productive terms than is presently the case. And there will be times when we need to split the difference on how productivity is conceptualized, depending on the institution. Nevertheless, should our institutions allow us to lose too much aggregate time value in the form of supply, we cannot expect to maintain the economic stability of aggregate demand, indefinitely.
"Equal" Income Presupposes Abundance. Equal Time Value, Scarcity Income based approaches to inequality, don't get at the underlying problems of our actual time scarcity, in relation to what non tradable sectors and governments expect of us. One approach to inequality, would be for those with limited incomes to contribute to non tradable sector activity outcomes, via the time they actually possess.
Time Value in Relation to Total Factor Productivity During historical moments of tradable sector expansion, it's often possible for societies to coordinate economic participation, based largely on the new wealth that is being generated. But once the monetary flows of non tradable sector activity begin to dominate, that creates excess demands on existing wealth. Hence societies may need additional means to generate wealth as a point of (reciprocal) origin. Economic time value - given today's high levels of human capital investment - is an obvious choice.
Why Are Normative Healthcare Arguments So Confusing? Too much healthcare discussion takes place as though supply side limits were not actually in effect. How does one redistribute from a supply side which is constrained at the outset? Over the years, recurring discussions as to what "should be" (at the microeconomic level), have been squelched via legislation. And many of these earlier efforts are already forgotten, once normative arguments resume in a broader societal context.
Deep Learning in a Time of Increasing Automation We can't expect to continue deep learning as a "race against the machine". Yet the deep learning we continue to embrace, needs a stronger economic context in terms of personal experiential value.
Only 25% Can Support Non Tradable Sector Requirements Why isn't this growing discrepancy more obvious? Some of it is hidden by debt and financial structures which smooth non discretionary consumption capacity. Nevertheless: Useful though our financial tools have been, they can't fill the gaps between institutional expectations and actual income capacity for the long term. Before any society can expect to meet its infrastructure maintenance needs, it has to make certain its aggregate income capacity and non tradable sector requirements are reasonably well aligned.
Medicare Cutbacks? No Rationale for Monetary Tightening Even though healthcare in the U.S. lacks full marketplace capacity, this sector is far from ready to accept limitations in revenue capacity (note recent hospital consolidations). Yet central bankers have been too quick to use Washington gridlock re healthcare policy, as yet another judgement call to reduce overall monetary representation.
Can General Equilibrium Wealth Become "Overfished"? Up to a point, the secondary market activities of asymmetrically compensated time, government redistribution, credit formation and financial instruments can work alongside tradable sector wealth to define general equilibrium. However, if these forms of wealth capture are excessively preferred over new wealth generation that is free of debt or redistribution, the common pool of circulating revenue may experience greater demand from all participants than central bankers are willing to accommodate.
Tuesday, December 26, 2017
Structural Reform: "Boring" If We Don't Need It!
Granted, this post title doesn't apply in every instance. But why be interested in structural reform for advanced economies, if one wouldn't also expect to benefit in some capacity? After all, the economy is mostly in good shape for the status quo. Given the extended recovery since the Great Recession (in spite of those left behind), most market observers find it difficult to think about potential status quo reforms. And those who remain left behind, still lack a sufficiently broad platform to offer their own suggestions and insights.
Complacency regarding economic outcomes, has once again become commonplace. Alas, structural reforms still seemed reasonable to many, in the early years of the Great Recession. Back then - alongside the professionals - many without economics degrees were also closely monitoring economic developments. Plenty of laypeople once expressed hope, that something constructive might evolve out of all the pain and confusion. But nothing really did. Why should the average person continue to express concern about structural reforms, if economists - whatever their ideological outlook - determined early on that no (real economy) structural changes would be necessary?
During the earlier years of my writing project, I had more opportunities to discuss my work with family members, friends and acquaintances. Today those opportunities don't come around very often. Yet I can understand why many citizens grew weary of an initially hopeful dialogue that finally dissolved in blame and recriminations. Once citizens realized how difficult it would be to take part in a constructive response to the heartache of the Great Recession, many simply returned to the defense of earlier outlooks and societal positions.
Fortunately - for me - the still unresolved economic challenges of our times, never became boring! Why should it matter, that I could also benefit from production reform, given the fact millions of others could benefit as well? If that's "greedy" on our part then so be it. While potential benefits are many, here's the first that invariably comes to mind: If knowledge use systems were already a societal option, precious few individuals would need to go into their later years all alone. People would be able to assist one another in their efforts to remain economically and socially connected, as long as humanly possible.
And those are just benefits that could accrue in the short run. Long term benefits would include a growing ability for populations to fully engage with more knowledge and skill overall, than is now feasible. I like to imagine that in such scenarios, bookstores would once again become popular, in many communities large and small.
Economic matters occupy my mind now, even more than they did when I began sustained work on this project in 2003. That's a real plus, and 2018 should allow me to step up the process on a series of writings that could further assist readers (eventually to be placed in the sidebar) with basic concepts organized so as to be easier to understand. New Years now seem to suggest a "resolution" of honing in more carefully on particular areas. 2016 turned out to be the year to organize the "uncommon" glossary, while 2017 has been a year for sorting material for the initial books of the series.
The most difficult part thus far, has been pulling myself away from online activities for a while, so that more material can be edited and completed. There's so much I want to keep up with online (and the learning process never stops), but there's only so much time in a day. In 2018, I hope to continue posting regularly, but there may be weeks when I can only post once or twice.
With a little luck, the next recession won't set us back unduly, and constructive dialogue might even reemerge. Yet there's much I need to get done before another recession is even a remote possibility. Thanks so much to all my readers - some who have been patient enough to keep up with almost five years of blogging. Here's wishing a Happy New Year to everyone.
Complacency regarding economic outcomes, has once again become commonplace. Alas, structural reforms still seemed reasonable to many, in the early years of the Great Recession. Back then - alongside the professionals - many without economics degrees were also closely monitoring economic developments. Plenty of laypeople once expressed hope, that something constructive might evolve out of all the pain and confusion. But nothing really did. Why should the average person continue to express concern about structural reforms, if economists - whatever their ideological outlook - determined early on that no (real economy) structural changes would be necessary?
During the earlier years of my writing project, I had more opportunities to discuss my work with family members, friends and acquaintances. Today those opportunities don't come around very often. Yet I can understand why many citizens grew weary of an initially hopeful dialogue that finally dissolved in blame and recriminations. Once citizens realized how difficult it would be to take part in a constructive response to the heartache of the Great Recession, many simply returned to the defense of earlier outlooks and societal positions.
Fortunately - for me - the still unresolved economic challenges of our times, never became boring! Why should it matter, that I could also benefit from production reform, given the fact millions of others could benefit as well? If that's "greedy" on our part then so be it. While potential benefits are many, here's the first that invariably comes to mind: If knowledge use systems were already a societal option, precious few individuals would need to go into their later years all alone. People would be able to assist one another in their efforts to remain economically and socially connected, as long as humanly possible.
And those are just benefits that could accrue in the short run. Long term benefits would include a growing ability for populations to fully engage with more knowledge and skill overall, than is now feasible. I like to imagine that in such scenarios, bookstores would once again become popular, in many communities large and small.
Economic matters occupy my mind now, even more than they did when I began sustained work on this project in 2003. That's a real plus, and 2018 should allow me to step up the process on a series of writings that could further assist readers (eventually to be placed in the sidebar) with basic concepts organized so as to be easier to understand. New Years now seem to suggest a "resolution" of honing in more carefully on particular areas. 2016 turned out to be the year to organize the "uncommon" glossary, while 2017 has been a year for sorting material for the initial books of the series.
The most difficult part thus far, has been pulling myself away from online activities for a while, so that more material can be edited and completed. There's so much I want to keep up with online (and the learning process never stops), but there's only so much time in a day. In 2018, I hope to continue posting regularly, but there may be weeks when I can only post once or twice.
With a little luck, the next recession won't set us back unduly, and constructive dialogue might even reemerge. Yet there's much I need to get done before another recession is even a remote possibility. Thanks so much to all my readers - some who have been patient enough to keep up with almost five years of blogging. Here's wishing a Happy New Year to everyone.
Saturday, December 23, 2017
GDP: What Welfare Needs to be Quantified?
As aggregate output has become more difficult to determine, due in large part to the nature of today's services sectors, GDP as a measure has increasingly been questioned as well. Might the changing nature of aggregate output, help to explain recent debates regarding potential human welfare considerations for GDP? If so, how could such an approach assist this vital measure in its core tasks - particularly given its underlying monetary representation?
Diane Coyle noted some of these issues in a recent podcast for the International Monetary Fund. She stressed the sizable gap between what is being measured, versus welfare effects which could be worthy of recognition. In particular, GDP is "less well suited to measure progress in today's digital economy."
Despite the importance of digital product for societal gain, the greatest need of the present, is careful attention to human welfare via levels of aggregate economic participation. In particular: How has the resource capacity of multiple income levels changed over time, in relation to what have become basic institutional requirements? We simply don't have a clear statistical picture, how these institutional expectations correlate with the resource capacity of a full range of citizenry. What's more, a better understanding of our existing non tradable sector requirements, might present a clearer picture of existing societal debt obligations as well.
Digital gains, on the other hand, largely accrue in a discretionary consumer context. Regular readers likely aren't surprised, that I find the non discretionary requirements of non tradable sector activity, to be one of the greatest obstacles standing in the way of human welfare. Nevertheless: Even though non tradable sectors have been less than forthcoming re quantifiable output, we could eventually develop new means of services generation which are more transparent at the outset. And doing so, could vastly improve the measure of GDP in the 21st century.
The present lack of services quantification, has made it difficult to understand the dilemma that lower income levels actually face. Even as citizens have experienced tradable sector abundance for decades, their ability to do so has gradually diminished, as vital elements of non tradable sector assets and participation have been made artificially scarce. Should additional measure of human welfare be taken into account for the purposes of GDP measure, one can only hope our actual participation in economic life, becomes easier to determine than is presently the case.
Diane Coyle noted some of these issues in a recent podcast for the International Monetary Fund. She stressed the sizable gap between what is being measured, versus welfare effects which could be worthy of recognition. In particular, GDP is "less well suited to measure progress in today's digital economy."
Despite the importance of digital product for societal gain, the greatest need of the present, is careful attention to human welfare via levels of aggregate economic participation. In particular: How has the resource capacity of multiple income levels changed over time, in relation to what have become basic institutional requirements? We simply don't have a clear statistical picture, how these institutional expectations correlate with the resource capacity of a full range of citizenry. What's more, a better understanding of our existing non tradable sector requirements, might present a clearer picture of existing societal debt obligations as well.
Digital gains, on the other hand, largely accrue in a discretionary consumer context. Regular readers likely aren't surprised, that I find the non discretionary requirements of non tradable sector activity, to be one of the greatest obstacles standing in the way of human welfare. Nevertheless: Even though non tradable sectors have been less than forthcoming re quantifiable output, we could eventually develop new means of services generation which are more transparent at the outset. And doing so, could vastly improve the measure of GDP in the 21st century.
The present lack of services quantification, has made it difficult to understand the dilemma that lower income levels actually face. Even as citizens have experienced tradable sector abundance for decades, their ability to do so has gradually diminished, as vital elements of non tradable sector assets and participation have been made artificially scarce. Should additional measure of human welfare be taken into account for the purposes of GDP measure, one can only hope our actual participation in economic life, becomes easier to determine than is presently the case.
Thursday, December 21, 2017
Lifetime Learning in Total Factor Productivity Context
There's a sort of "good news, bad news" aspect to a recent Barry Eichengreen article, "Two Myths About Automation". Here's the problem I found with (what appears to be) his conclusion: Are we reasonable in our confidence that automation won't necessary take our jobs, in part because total factor productivity remains lackluster?
After all, the bottom line regarding questionable productivity is some degree of relatively reduced output in aggregate. These difficult to identify output losses can continue, but aggregate output is still closely tied to further employment options. From the Project Syndicate article:
Again, it helps to envision future employment potential based on potential output gains. Without measurable growth in actual output, one cannot expect additional employment capacity. Since a certain percentage of non tradable sector output is intentionally limited, existing employment presently depends on what the status quo is willing to allow. Most important for both healthcare and housing, however, are the quality requirements which most contribute to existing imbalances between aggregate input and output. The quality requirements of these sectors likely bears the most responsibility, for the conundrum that is today's productivity stagnation. Nevertheless, these sectors package their experiential product so as to make it difficult to determine - let alone measure - the aggregate output gains that would otherwise be possible.
Notice in particular, how Eichengreen's proposed response of lifetime learning to maintain employment options, ties into the productivity conundrum of non tradable sector quality product requirements. Alas, lifetime learning in a status quo context, is still part of a knowledge and skill acquisition process which continues to increase aggregate input (skill requirements) in relation to the aggregate output of total factor productivity. One might reasonably ask, given this circumstance: Might lifetime learning as a sort of human capital coping mechanism, actually reduce total factor productivity?
Presently, it depends on whether one assumes education over a lifetime as love of learning - that is, education as purely experiential product. On the other hand, might this be a strictly pragmatic purchase? Is the educational product a human capital investment, which needs a specific economic result in the form of reliable employment? If so, the pragmatic option also translates into employment as a component of knowledge and skill production, which in turn contributes to measured output in a sort of knowledge "factory" process. Basically, the pragmatic option is not "supposed" to become final product in the knowledge production cycle, hence would become an investment loss should this in fact occur.
On the other hand, treating formal education as experiential product (as I've typically done) may allow us to be satisfied with education as final product. In this instance we can be satisfied (hopefully!) with educational product as the ultimate completion of an aggregate input to output cycle. If education is sought out of love of learning, and doesn't offer economic reward, measurable output, or meaningful dialogue with others for that matter, one might assume the total factor productivity loss is relatively minimal. Yet making that assumption includes the reasoning that one's personal investments need not count, in the lives of others.
What of aggregate productivity if education is purchased not as a consumption function, but specifically for human capital investment? Potential employment risks in this instance are more obvious, both at a personal and societal level. The problem for lifetime learning at present, is the lack of economic connection between today's formal education as reliable input for knowledge based product.
Even though formal education as experiential product is important, one's personal efforts still need to be part of the larger dispersion of knowledge use in society. Fortunately, the same blockchain technology that presently contributes to digital monetary processes, has an important parallel in learning processes, in that peer to peer learning could serve as cumulative wealth connections. The cumulative factor for peer to peer learning, would allow each input of knowledge and skill to serve as a point of simultaneous output. Time arbitrage would eventually allow for substantial productivity gains, by making the measure of time based services a transparent process.
Should time based services become organized as cumulative wealth generation, lifetime learning would readily contribute to total factor productivity. Personal learning efforts would no longer pose extensive risks of one's money and time, because individual learning would translate into mutual employment potential. In all of this, the ratio of inputs to outputs is important, for how society could ultimately expect the use of knowledge to contribute to progress and long term growth.
After all, the bottom line regarding questionable productivity is some degree of relatively reduced output in aggregate. These difficult to identify output losses can continue, but aggregate output is still closely tied to further employment options. From the Project Syndicate article:
While many people believe that technological progress and job destruction are accelerating dramatically, there is no evidence of either trend. In reality, total factor productivity, the best summary measure of the pace of technological change, has been stagnating since 2005 in the US and across the advanced-country world.He suggests there are two myths: that jobs are actually threatened, and that higher skill jobs in particular are at risk. After all, the reasoning goes, if productivity isn't all that great, how exactly are jobs supposed to be threatened? Nevertheless, he stresses the important of continued learning, so as to keep up with changes that automation will bring to the workplace.
Again, it helps to envision future employment potential based on potential output gains. Without measurable growth in actual output, one cannot expect additional employment capacity. Since a certain percentage of non tradable sector output is intentionally limited, existing employment presently depends on what the status quo is willing to allow. Most important for both healthcare and housing, however, are the quality requirements which most contribute to existing imbalances between aggregate input and output. The quality requirements of these sectors likely bears the most responsibility, for the conundrum that is today's productivity stagnation. Nevertheless, these sectors package their experiential product so as to make it difficult to determine - let alone measure - the aggregate output gains that would otherwise be possible.
Notice in particular, how Eichengreen's proposed response of lifetime learning to maintain employment options, ties into the productivity conundrum of non tradable sector quality product requirements. Alas, lifetime learning in a status quo context, is still part of a knowledge and skill acquisition process which continues to increase aggregate input (skill requirements) in relation to the aggregate output of total factor productivity. One might reasonably ask, given this circumstance: Might lifetime learning as a sort of human capital coping mechanism, actually reduce total factor productivity?
Presently, it depends on whether one assumes education over a lifetime as love of learning - that is, education as purely experiential product. On the other hand, might this be a strictly pragmatic purchase? Is the educational product a human capital investment, which needs a specific economic result in the form of reliable employment? If so, the pragmatic option also translates into employment as a component of knowledge and skill production, which in turn contributes to measured output in a sort of knowledge "factory" process. Basically, the pragmatic option is not "supposed" to become final product in the knowledge production cycle, hence would become an investment loss should this in fact occur.
On the other hand, treating formal education as experiential product (as I've typically done) may allow us to be satisfied with education as final product. In this instance we can be satisfied (hopefully!) with educational product as the ultimate completion of an aggregate input to output cycle. If education is sought out of love of learning, and doesn't offer economic reward, measurable output, or meaningful dialogue with others for that matter, one might assume the total factor productivity loss is relatively minimal. Yet making that assumption includes the reasoning that one's personal investments need not count, in the lives of others.
What of aggregate productivity if education is purchased not as a consumption function, but specifically for human capital investment? Potential employment risks in this instance are more obvious, both at a personal and societal level. The problem for lifetime learning at present, is the lack of economic connection between today's formal education as reliable input for knowledge based product.
Even though formal education as experiential product is important, one's personal efforts still need to be part of the larger dispersion of knowledge use in society. Fortunately, the same blockchain technology that presently contributes to digital monetary processes, has an important parallel in learning processes, in that peer to peer learning could serve as cumulative wealth connections. The cumulative factor for peer to peer learning, would allow each input of knowledge and skill to serve as a point of simultaneous output. Time arbitrage would eventually allow for substantial productivity gains, by making the measure of time based services a transparent process.
Should time based services become organized as cumulative wealth generation, lifetime learning would readily contribute to total factor productivity. Personal learning efforts would no longer pose extensive risks of one's money and time, because individual learning would translate into mutual employment potential. In all of this, the ratio of inputs to outputs is important, for how society could ultimately expect the use of knowledge to contribute to progress and long term growth.
Sunday, December 17, 2017
Wealth Creation and Capture Have Macro Effects
Why don't our current economic models take the general equilibrium effects of wealth creation, versus wealth claims, into account? Especially since factors such as consumer debt, government subsidies and other forms of redistribution all diminish the natural Wicksellian interest rate? While some advanced economy debt still contributes to wealth origination, our prevalent consumer debt patterns (for instance) are mostly claims on what today's existing wealth and income can provide in the future. Even though aggregate spending capacity greatly depends on what is monetarily allowed in the immediate present.
Had I not allowed myself to be sidelined from math in high school (and then waited too many years to try again), I would have sought to build a model which could highlight the general equilibrium effects of wealth origination alongside claims on future wealth. Such claims could be discerned, through the identification of primary wealth origination and today's revenue dependent secondary markets, such as today's healthcare.
The macroeconomic effects of wealth creation and capture are important for many reasons, not the least of which public and private designations are not the identifiers of wealth origination. Even though governments routinely engage in wealth capture instead of wealth creation, private industry does the same, particularly during periods of non tradable sector dominance. Only consider how today's government associated multipliers work poorly, since a large percentage of fiscal activity is ultimately earmarked for wealth capture. Yet it's easy to forget that government multipliers hold some positive relevance during periods of tradable sector dominance, when governments are more likely to contribute to new tradable sector formation. On the other hand, government subsidies for existing tradable sector activity, are more often another example of cronyism in the form of shared wealth capture.
Fortunately, not all wealth capture is negative in nature. When non tradable sectors aren't subjected to extensive artificial constraints, secondary market activity can often contribute to economic dynamism and monetary velocity. In emerging economies, secondary market financial activity and redistribution for high skill knowledge use, can sometimes lend stability and dynamism for new points of wealth origin. What's important, however, is recognizing when the tipping point of secondary market dominance over primary market formation, begins to affect macroeconomic outcomes. By no means is this danger limited to economies that successfully mature. By paying closer attention to the aggregates of tradable sector and non tradable sector activity, societies would also find it easier to understand when a nation's debt accumulation, begins to present problems for economic stability and dynamism.
Sometimes a critical perspective from others, makes it easier to reconsider the fundamentals. That was certainly the case for me after reading a post (HT Miles Kimball) that not only questioned DSGE models, but today's limited options to DSGE thought as well. Of course it's all too easy to be critical of DSGE models, but what's interesting is that so many are skeptical for entirely different reasons! There's a wide range of viewpoints involved, by no means limited to economists, as to why DSGE models aren't effective in the real world.
Today's general equilibrium perspectives - especially when simplified - don't square well with structural real economy factors. The authors of the above linked post, note that for Freshwater people, "government has no effect". And "Saltwater variants add in the Calvo fairy to make up for the fact not all prices respond to shifts in equilibrium."
It's interesting, that only a few basic concepts of equilibrium are up for broad discussion. Yet consider how a Calvo fairy could matter. Secondary markets, as they they moved towards equilibrium dominance, were also more likely to establish inflexible prices (price making). Walrasian equilibrium at least held more validity, during the earlier dominance of tradable sector activity which relied more on price taking - hence simpler forms of equilibrium coordination.
Too much price and wage stickiness exist now, for a real semblance of the early equilibrium to be reclaimed. After all, the first perceptions of equilibrium evolved in times of tradable sector dominance. By no means does that suggest the DSGE model is more useful. Remember that DSGE evolved as governments were consolidating their share of the wealth gains, from still expanding tradable sector dominance. That economic circumstance is part of our economic past and has been for decades, even though there has been little response to this reality, thus far.
In other words, changing sectoral conditions, and their long term effects on general equilibrium growth potential, have yet to be accounted for. Unfortunately, earlier sectoral patterns which suggested equilibrium structure during their turn, have shifted beyond recognition. Meanwhile, the wealth capture effects of secondary market activity are being hardened with regulations and rules from special interests that remain determined to secure reliable monetary flows. Needless to say, these flows will remain "reliable", until - finally - they no longer are.
What, then, does the increasingly fragile nature of secondary market domination, suggest for future wealth potential? Regular readers know that I am no liquidationist, for I believe extensive use of knowledge can be recreated, on primary market terms in which no debt or redistribution is needed. My main concern is that if present systems break down from secondary market dominance, so too will an extensive portion of today's knowledge use and economic participation. So far as that goes, any economist who suggests that today's political polarization is not linked to macroeconomic outcomes (and some have of late), might want to reconsider. If we don't craft a better understanding of macroeconomics before too much political fallout occurs, there's no guarantee we'll get the chance to preserve prosperity, should we wait too long.
Many continue to believe that the spending of nations can somehow derive from future debt obligations. Still, every nation reaches a point when nominal spending capacity must be maintained from the wealth that is currently being generated, rather than the wealth that is being claimed. True, it's difficult to give up the idea that wealth can somehow derive from what is already claimed, in part because this allows special interests to control the ways in which economic activity takes place. Societies find it desirable to control how wealth generation and capture occur, and so they can - again, up to a point. Once the process goes on too long, and too much wealth creation is stalled, equilibrium expansion through wealth capture is no longer possible. Do we have the collective courage to allow new points of wealth origination and general equilibrium growth, on the part of individuals outside the purview of special interests? Only time will tell.
Had I not allowed myself to be sidelined from math in high school (and then waited too many years to try again), I would have sought to build a model which could highlight the general equilibrium effects of wealth origination alongside claims on future wealth. Such claims could be discerned, through the identification of primary wealth origination and today's revenue dependent secondary markets, such as today's healthcare.
The macroeconomic effects of wealth creation and capture are important for many reasons, not the least of which public and private designations are not the identifiers of wealth origination. Even though governments routinely engage in wealth capture instead of wealth creation, private industry does the same, particularly during periods of non tradable sector dominance. Only consider how today's government associated multipliers work poorly, since a large percentage of fiscal activity is ultimately earmarked for wealth capture. Yet it's easy to forget that government multipliers hold some positive relevance during periods of tradable sector dominance, when governments are more likely to contribute to new tradable sector formation. On the other hand, government subsidies for existing tradable sector activity, are more often another example of cronyism in the form of shared wealth capture.
Fortunately, not all wealth capture is negative in nature. When non tradable sectors aren't subjected to extensive artificial constraints, secondary market activity can often contribute to economic dynamism and monetary velocity. In emerging economies, secondary market financial activity and redistribution for high skill knowledge use, can sometimes lend stability and dynamism for new points of wealth origin. What's important, however, is recognizing when the tipping point of secondary market dominance over primary market formation, begins to affect macroeconomic outcomes. By no means is this danger limited to economies that successfully mature. By paying closer attention to the aggregates of tradable sector and non tradable sector activity, societies would also find it easier to understand when a nation's debt accumulation, begins to present problems for economic stability and dynamism.
Sometimes a critical perspective from others, makes it easier to reconsider the fundamentals. That was certainly the case for me after reading a post (HT Miles Kimball) that not only questioned DSGE models, but today's limited options to DSGE thought as well. Of course it's all too easy to be critical of DSGE models, but what's interesting is that so many are skeptical for entirely different reasons! There's a wide range of viewpoints involved, by no means limited to economists, as to why DSGE models aren't effective in the real world.
Today's general equilibrium perspectives - especially when simplified - don't square well with structural real economy factors. The authors of the above linked post, note that for Freshwater people, "government has no effect". And "Saltwater variants add in the Calvo fairy to make up for the fact not all prices respond to shifts in equilibrium."
It's interesting, that only a few basic concepts of equilibrium are up for broad discussion. Yet consider how a Calvo fairy could matter. Secondary markets, as they they moved towards equilibrium dominance, were also more likely to establish inflexible prices (price making). Walrasian equilibrium at least held more validity, during the earlier dominance of tradable sector activity which relied more on price taking - hence simpler forms of equilibrium coordination.
Too much price and wage stickiness exist now, for a real semblance of the early equilibrium to be reclaimed. After all, the first perceptions of equilibrium evolved in times of tradable sector dominance. By no means does that suggest the DSGE model is more useful. Remember that DSGE evolved as governments were consolidating their share of the wealth gains, from still expanding tradable sector dominance. That economic circumstance is part of our economic past and has been for decades, even though there has been little response to this reality, thus far.
In other words, changing sectoral conditions, and their long term effects on general equilibrium growth potential, have yet to be accounted for. Unfortunately, earlier sectoral patterns which suggested equilibrium structure during their turn, have shifted beyond recognition. Meanwhile, the wealth capture effects of secondary market activity are being hardened with regulations and rules from special interests that remain determined to secure reliable monetary flows. Needless to say, these flows will remain "reliable", until - finally - they no longer are.
What, then, does the increasingly fragile nature of secondary market domination, suggest for future wealth potential? Regular readers know that I am no liquidationist, for I believe extensive use of knowledge can be recreated, on primary market terms in which no debt or redistribution is needed. My main concern is that if present systems break down from secondary market dominance, so too will an extensive portion of today's knowledge use and economic participation. So far as that goes, any economist who suggests that today's political polarization is not linked to macroeconomic outcomes (and some have of late), might want to reconsider. If we don't craft a better understanding of macroeconomics before too much political fallout occurs, there's no guarantee we'll get the chance to preserve prosperity, should we wait too long.
Many continue to believe that the spending of nations can somehow derive from future debt obligations. Still, every nation reaches a point when nominal spending capacity must be maintained from the wealth that is currently being generated, rather than the wealth that is being claimed. True, it's difficult to give up the idea that wealth can somehow derive from what is already claimed, in part because this allows special interests to control the ways in which economic activity takes place. Societies find it desirable to control how wealth generation and capture occur, and so they can - again, up to a point. Once the process goes on too long, and too much wealth creation is stalled, equilibrium expansion through wealth capture is no longer possible. Do we have the collective courage to allow new points of wealth origination and general equilibrium growth, on the part of individuals outside the purview of special interests? Only time will tell.
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