Wrap Up for October 2017

An interesting discussion regarding automation and employment came up recently, which posed two questions. Given the likelihood of more robots doing the work of humans, 1) Can we find fulfilling ways to spend our time? And, 2) Can we find a stable and fair distribution of income?

1) Much of my concern is finding fulfilling ways to spend our time, only this process needs to be expressed in economic terms. Why? Once money is introduced into any social setting, it becomes increasingly difficult for people to maintain informal and reliable constructs of activity, which are not somehow reinforced by money. And many valuable (potential) applications of our time have become difficult to express, via the economic choices we presently have.

2) I've argued for local defined equilibrium settings, in part because I do not believe "fair" redistribution is possible in general equilibrium. Large economies in particular, are already stretched in general equilibrium terms (as ongoing tight monetary conditions have made evident), by time based knowledge product claims on commodity income. These already existing service based claims not only crowd tradable sector output, but would complicate matters further, if more redistribution claims (basic income) were made on the same base of wealth origination. Which is an important reason I've suggested making knowledge use an integral component of the commodity wealth base, via time value.

As to the likelihood of future automation, some further thoughts. Some groups have both incentive and market power to ensure that robots do not meaningfully cut into the value of their high skill time. These groups intend to preserve their claims wherever possible. And even though low skill workers lack the market power to preserve their positions, not all firms will have the incentive to automate tasks, when potential workers live nearby who are willing to work for small wages.

The Fed continues to work with a framework which makes inflation appear as though a mystery.

Thinking is also something you get to do for pleasure.

From AEI
"Our primary policy focus must not merely be helping the poor or the marginalized "other", but rather restoring them to a position in which they are needed - in which they are necessary, integral participants in our economy, our communities, and our collective imagination."

From Kevin Bryan, a paper on innovation, plus required class material for innovation and technology

What are some of the current incentives for near future automation? Timothy Taylor also takes a look at robot stock.

When the public chooses "cures" that are worse than the disease.

Much of the lost lead in education is due to the declining general equilibrium position of matched resource capacity as a wealth origination position. Worse, we have excessive competition for knowledge use compensation, in dependent parts of the system that are not resource matched at the beginning of the process.

In "We're About to Fall Behind the Great Depression", David Leonhardt references a presentation from Olivier Blanchard and Larry Summers at the Rethinking Macroeconomic Policy conference.

By no means is non tradable sector intransigence re housing requirements, limited to the U.S.

From Christina and David Romer:
"Why Some Times are Different: Macroeconomic Policy and the Aftermath of Financial Crisis"

It only took ten years for discretionary spending to return to its previous level...

Scott Sumner imagines an island economy to make some basic macro points in these two posts.

Why does the Fed have limited power over its liability side?

"The forces that drive regional disparities are built into the mechanisms of globalisation, which make them hard to resist."

"Mutual respect is the only way to heal our divided politics."

From Gregory Mankiw and Ricardo Reis:
Friedman's Presidential Address in the Evolution of Macroeconomic Thought

Are larger cities more resilient to technological unemployment?

Where is government money going?

When all else fails, agricultural growers will also rent land in Mexico...

The future is multiple

Some thoughts on this post from Dietrich Vollrath, in response to "Investment is lower than you'd expect given profits". First, consider where profits are now more likely to originate, in (general equilibrium dependent) knowledge based endeavour which continues to crowd commodity based prior wealth formation. Since output is constrained in tradable sector activity, there is relatively less investment in these sectors, especially since aggregate spending representation on the part of central bankers, might not accurately reflect said output efforts.

Equally important, is that the investment required for the additional augmentation of time based product, is intended mostly to maintain a relative constant, given tight monetary conditions. Again, investment for high skill time based services, need not be exponential or replicative to achieve gains in the same sense as tradable sector production. And this form of (non tradable sector) investment is more likely to benefit individuals, rather than groups of employees.

Will the U.S. embrace prefabricated housing?

Is Industry Concentration a "Negative"?

Is it reasonable to defend monopolies or oligopolies? For instance: Do they restrict output? Tyler Cowen recently highlighted a paper which asks, "Has industry concentration increased price and restricted output?" While the authors did observe higher prices,  Cowen notes:

In other words, the output restrictions are not there.

Indeed, some of the more recent industry concentrations are successful because they've created platforms which are available to entire populations. Nevertheless, we do have output restrictions in the economy which are a major factor in economic stagnation. So what is going on, if arbitrary output limits are not showing up in these statistics?

Another way to frame the problem: Is industry concentration largely responsible, for the marketplace negatives of the present? Even though tradable sector activity doesn't restrict output as does non tradable sector activity, why haven't the output restrictions of the latter proven more evident?

Industry concentration isn't even necessary, for many sectors to utilize technology and maintain output as a relative constant, regardless of whether more output would prove beneficial. Yet actual restrictions in housing options and time/knowledge based product are not yet accounted for - given the fact neither of these sectors are keeping pace with population growth.

Perhaps the more important industry negatives, are the concentrations of marketplace power which effectively block economic access. In these instances, marketplace power often accrues to individuals in ways that shape entire marketplace outcomes. The more decisive marketplace negatives take place in arbitrary non tradable sector product definitions, which frequently exclude both lower income levels, and those without college degrees, from full participation in the economy.

Hidden in this shifting economic framework, are the ways in which local small firms particularly benefit, from the restrictive effects of regulatory requirements for product quality. Given this reality, the more pressing concern may not be so much about industry concentration, as industry control over product delineation. One can only hope that industry concentration doesn't catch all the blame, while the real limiting marketplace factors are still hiding in plain sight.

Some Considerations Regarding Housing Costs

When we say that housing is not "affordable" in the nation's most desirable regions, what is actually at stake?

Housing costs in these areas not only reflect constrained supply side realities, they are also representative of changes in relative income levels and global ownership patterns. There's a global marketplace which closed access cities participate in to some degree - for both services and housing. As for income, the reigning marketplace efficiencies of general equilibrium, increasingly mean employment via core or peripheral capacities. And much of the high skill knowledge based core, clusters in what have become the most desirable areas. Meanwhile, problems with access to areas of highly productive agglomeration, have been exacerbated by demand based responses which often don't take missing supply into account.

Even though it would be a long term approach, we could alleviate some of these additional access costs, by allowing more use of high skill knowledge in other regions as decentralized, primary market organizational patterns. In other words, we would be creating more productive agglomeration, in part so that aggregate housing costs could be spread across broader marketplace patterns. The excessive centralization of today's most important knowledge use, is an underlying factor in the housing costs of closed access cities.

If non tradable sector time based product is structured solely as secondary market dependence (as is currently the case), the process leads to too much societal pressure, for access to productive agglomeration. Among the many examples in this regard, are healthcare practitioners who (understandably) choose to locate where not only is it most pleasant to live, but where income potential is greatest. Hence these groups have considerable incentive to locate in closed access areas where their income can also be maximized, via locally existing revenue flows. Yet it's a process which can lead to an incomplete general equilibrium, due to lack of production and consumption of time based services in a full regional economic context.

Another way to think about the costs of housing in today's closed access cities, is the Baumol effect, which importantly serves as a coordination mechanism for a subset of potential time based services (at multiple income levels) alongside more direct forms of wealth generation. I emphasized subset here, because local zoning and regulation, also limits the extent by which middle and lower skill levels can partake in these local Baumol effects.

One advantage of knowledge use systems would be that - like the Baumol effect - time arbitrage also achieves income smoothing for mutual local coordination, since time arbitrage allows local group time value to function in relation to itself. One difference between a defined equilibrium and general equilibrium, however, is that time arbitrage would acknowledge the vital relationship between local income/resource capacity and local non tradable sector costs.

A better understanding of this relationship, would make it possible for small groups to take full responsibility for local infrastructure requirements and asset formation. By coordinating economic time value in relation to itself, more groups would be able to take part in our most important knowledge based challenges, without the near necessity of locating in areas which are currently exposed to high housing costs.

Skills Coordination Games as Preference Sampling

How might we choose to structure daily routines - which could include anything from personal aspirations, basic work functions or ongoing familial responsibilities, with other groups which share relatively similar viewpoints and values? Granted, we already have approximations for the above scenario, to some degree. Most of the income levels which have shifted upward, as workplace structure has divided between core and peripheral elements, include spontaneous coordination in the marketplace for time based services.

It's the income levels which have shifted downward, where people tend to lack common reference points to coordinate mutual assistance. Skills coordination games could help some of these individuals explore new organizational frameworks for individual and group development. Such games could provide a beginning point, whereby individuals with limited resources might contemplate a more hopeful future.

Many of the informal coordination patterns of the past no longer exist, in developed economies. Future patterns will need economic definition, so they can contribute to the productive agglomeration which has largely been lost outside of today's more prosperous regions. In all of this, both producer and consumer aspirations will need to be taken into account, so that individuals can contribute to the reality of their own environments.

Nevertheless, it won't be easy to discern personal preferences at the outset. Not only has our economic reality changed greatly in recent decades, but our institutions have often substituted their own preferences on our behalf, in the meantime. Experimentation for the creation of new workplaces, will be slow and to some degree, painstaking. Skills coordination games would provide opportunities for individuals to come together and debate the possibilities of shared aspiration and responsibility.

In some instances, skills coordination games would simply provide a test, to determine how one feels about the process. Do these activities seem practical to the observer? Answers will depend on one's prior inclinations and perceptions. Much may also depend on the work habits one has already put to use in the workplace, or other skills and activities that seem reasonable to share with others.

Once a given group is organized and ready to proceed, a process of deliberation is set into motion. First, how do our more important aspirations fit into our ongoing schedules? Often, daily schedules revolve around these challenges, even though they do not always take an economic form and are instead a part of our personal activity. How might time arbitrage be different in this regard? The flexible nature of educational settings in knowledge use systems, could provide occasions when we get the chance to discuss our personal challenges with others within an economic framework.

Each group begins the discussion with personal aspirations and goals they would like to pursue. Simply hearing what others hope to achieve, suggests possibilities for others, as to the activities they might in turn wish to seek out. Once everyone shares these thoughts, the process begins again with hobbies and other areas of proficiency that participants would be willing to provide.

After these possibilities are discussed, is the third offering of lower skill work. What would participants be comfortable providing for others, and how much time would they be able to do so? A willingness to participate at multiple skill levels, makes it easier to achieve high levels of matched activity with others, which is one of the more important aspects of the game.

Participants might also discuss personal motivations for the preferences they seek. Once everyone is familiar with what is initially offered, the group shifts to what they might accept of the offerings, either in the present or at some point in the near future. How many gaps exist between what is needed, and what is being offered?

Whether or not this is a problem, depends on the nature of the group, and whether in some instances participants would consider educational commitments to more closely align with the expressed desires of the group. Plus, basics would be more important in the beginning, and as a game continues, there would be more focus on experiential options alongside practical options. After these discussions, everyone could once again compare offerings, and discuss whether the process unfolded differently from what their initial expectations might have been.

While little of this process may appear practical at first, these groups would be striving to determine in real time, what countless articles have said needs to be done: Begin the process of determining how we wish to live among one another in the future. Ultimately, it's a matter of finding better answers among ourselves, before our institutions can know how best to respond.

The Promise of Knowledge Use as Wealth Generation

Is it possible to reduce the dependency factor, of non tradable sector knowledge use? Should we adopt means to utilize knowledge more directly, much of the time based product which now represents budgetary burdens, could instead contribute to growth, and ultimately reduce economic stagnation. By allowing diverse skills and knowledge to function as points of economic origination, service sectors could eventually become more purposeful, and less dependent on the equilibrium limits that have resulted from wealth capture.

Why might time arbitrage hold such promise? Local reciprocity for the use of knowledge, could build new dimensions for personal and group challenges. One could also describe this process as building new productive agglomeration beyond today's equilibrium limits. Among the many reasons to create productive agglomeration for lower income levels, are the real estate costs of closed access areas, where much of today's most important core employment is now centered.

What might be some of the benefits of such a system?

1) Time arbitrage could serve as a market stabilizer, to reduce a growing imbalance between primary and secondary market activity. Economic stability is important not just in terms of monetary policy, but also for governments, citizens and markets - all of which are fragile due to debt which has substituted for more effective means of resource use. Presently, there are no other long term approaches to address extensive government debt that I am aware of, and I believe that the only solutions to do so involve structural real economy changes, rather than further tweaks in taxation or financial structure.

2) Knowledge use systems could move productive agglomeration beyond today's core and peripheral employment realities. Even though general equilibrium is mostly designed to meet the income expectations of core employment, productive agglomeration is possible in defined forms of equilibrium, which would more closely reflect the limited monetary resources that are the reality of many citizens. In particular, additional productive agglomeration would expand total equilibrium potential beyond its present constraints, given economic stagnation.

3) Equal time value as a point of individual to group coordination, can preserve individual autonomy. On the other hand, inflexible divisions and valuations of labour or skill, sometimes lead to less personal autonomy for individuals and groups alike, especially since unnecessary skills differentiation can mean permanent class divisions. When time preferences are given reasonable priority alongside skill use preferences, mutual employment results in better time management for all concerned, in ways not always possible, otherwise.

4) Giving a green light to knowledge use as part of time based wealth, would mean a more diverse, integrated and inclusive economy. When time value and knowledge are tapped as a prior point of economic activity, more ideas and challenges become possible, than what might otherwise be funded when the use of knowledge remains dependent on other sources of revenue as a starting point. This form of organizational capacity would also - finally - be able to make good use of today's vast digital realm, for both the experiential and practical applications of knowledge .

Tradable Sector Strength Was the Real "Trickle Down"

In economics, there's the policy "trickle down effects" that were largely discounted by economists (and in some instances ridiculed), versus the real economy trickle down effect. It's the latter, which some of us of a certain age particularly miss: those days of plentiful second hand markets that contributed to decades of weekend entertainment, and more. Supply side trickle down meant increased access to products which still had plenty of value, once the original buyers decided to part with them.

Often, resold goods had scarcely even been used. In the eighties, many second hand stores further specialized in new areas such as music and sporting goods. Quality product such as high end clothing could found with be price reductions which meant inexpensive signaling, for that matter. From the seventies (at least here in the South) to the early part of the new century: Mass production made it possible for most anyone with limited incomes - wherever they happened to live - to enjoy many benefits of a modern economy.

What happened to second hand market abundance? While resale stores can still be found in some areas, their prominence reached a turning point about a decade ago. This unexpected death knell became obvious with the onset of the Great Recession, when second hand stores of all varieties began to close their doors. While some would fortunately remain in business in larger cities and towns, it ultimately became difficult for small towns to maintain even a single store. Yet only a decade earlier, in small towns, it was common to find at least three operating in close proximity to one another, putting those old downtown buildings to good use.

Retail in general has also faced its own setbacks, since the Great Recession. While some discretionary income loss is inevitable in times of recession, Liberty Street Economics recently highlighted the fact that this time, it took a full decade for discretionary income to return to trend. And by the time it finally returned to its earlier level, much in the marketplace was irrevocably changed.

Today, discretionary spending follows new patterns, much of which bypass many local communities. Two sets of circumstance about discretionary income losses, particularly stand out: First, the fact that Fed policy makers did not maintain aggregate spending capacity at the onset of the Great Recession, also accounts for Main Street losses too numerous to fathom. Second, non tradable sector demands continue to crowd out tradable sector activity, even now. Much of this crowding out has diminished the marketplaces which were fun, only to replace them with economic activity which is necessary, but not necessarily fun.

If we could somehow wave a wand to bring back economic dynamism, what would we want? Some would doubtless argue that in earlier decades, Baby Boomers such as myself had a lot more stuff than we "needed", so who misses the loss? Nevertheless: Given the crowding out that has occurred, no one knows the real extent, of what has been lost that people might still enjoy if they had the chance to do so.

Tradable sector activity was dynamic, in part because so much of it took place in ways that made resource coordination and reciprocation, far more obvious than what occurs in the present. And when too much economy activity becomes generated through debt, it becomes increasingly difficult for lower income levels to know the extent, to which discretionary spending is even a rational choice.

When resources are coordinated and matched without debt at the outset, societies have more room for flexibility and further options. Perhaps one of the best things about real economy trickle down, was the fact it encouraged societies to share the fruits of knowledge, as well. Alas, in times of economic stagnation, knowledge seems to be held more closely, as if the product of knowledge were the only remaining way to generate wealth. There are far better ways of building wealth, than hoarding the use of knowledge. Fortunately, we can do better.

Rights to Heal Need Not Counter Physician Authority

As if there wasn't enough political discord in Washington already, the evergreen issues of healthcare access have resisted resolutions as long as anyone can remember. I'm now halfway through "The Social Transformation of American Medicine", which explains some of the reality behind the struggle. Even before considering the arguments Paul Starr put forward, I didn't feel comfortable about proposing knowledge use that would only counter the approach by which organized medicine developed in the U.S.

Since healthcare became one sixth of the economy some years earlier, scarcely anyone believes it should demand more resource capacity than what has already transpired. What level of healthcare can our government realistically maintain, especially while more revenue is diverted to military purposes and tax relief? Could the distinct possibility of diminishing government revenue for healthcare, be behind some of these recent layoffs? Meanwhile, unpaid medical bills are on the rise as well.

Yet earlier attempts at reform, some in the guise of making healthcare more "efficient", often included organizational changes which would have reduced the ability of physicians to define their own work environments. Only consider however, that the same autonomy physicians preserved for themselves, is the same autonomy that so many individuals would like to experience for themselves. Are there ways to "bottle" or provide an institutional framing, for what physicians have managed to achieve for themselves? Instead of yet another reform attempt which would reduce physician autonomy, why not use their success as a reference point, for the delicate balance of interdependence and autonomy which we all seek in the workplace and in our personal lives.

Another problem, is that physicians - like others who offer high skill knowledge product - mostly utilize knowledge and skill in a price making context. Price making need not be problematic at a macroeconomic level, when the product in question is only a small part of marketplace structure. But now that healthcare has expanded to one sixth of the economy; the price making that takes place, especially when knowledge is utilized in a secondary or dependent market position, puts additional pressures on general equilibrium circumstance.

The fiat monetary systems which originated in the twentieth century, also contained a built in flexibility which allowed government debt to contribute to vast progress in healthcare. Now, however, political pressure is beginning to limit this flexibility. We don't know yet, the degree to which presumed limits to growth will affect the organizational capacity of healthcare in the near future. Just as healthcare practitioners felt the need to restrict supply in the Great Depression, similar rationale can arise during periods of economic stagnation, especially given the possibility that stagnation will be with us for a while. Are there means to overcome these limits, without further straining the institutional dynamics already in play?

Time arbitrage for the use of knowledge, would not be in competition with the functions of healthcare practitioners, since time preferences would reimburse skill sets instead of money. In other words, economic unit of account and exchange functions would be assigned to mutually coordinated time units, while money simultaneously reimburses time as new commodity formation. The changing "time prices" for specific skills sets, would provide useful clues for educational options in each group. Since each local group uses the time at its disposal, no debt formation takes place. Hence time units (time purchases time) become a direct component of wealth creation, which in turn allows knowledge use to assume a primary marketplace position.

Also important is that time units in this capacity can function like the price taker positions that are often found in tradable sector activity. It becomes possible for participants to do so, because - like tradable sector commodity pricing signals - the participants become aware of the potential equilibrium dimensions of time aggregates - only the process occurs locally, rather than globally. In this capacity, healthcare as time arbitrage also does not compete with traditional healthcare, since it generates new organizational patterns from knowledge use which do not require the resource capacity of general equilibrium.

Much has changed, since earlier periods when physicians found it necessary to reduce the numbers of their ranks as means to gain status. No one need question the quality product which physicians brought to the marketplace in the last century, and other groups which seek the right to heal would augment these valuable skills sets, not attempt to replace them. In the not so distant past, people from all walks of life in the U.S. could still aspire to a life of respectability and usefulness. By no means would a renewed right to heal, based on personal desire to help others, diminish the status and respectability of those who have made such tremendous sacrifices to make the most of their human capital.

Only 25% Can Support Non Tradable Sector Requirements

For centuries, the quality product of skilled craftsmen was associated with the consumption options of discretionary income. However, early in the twentieth century, quality healthcare in the U.S. - with its deep learning requirements - became the primary healthcare product option for all income levels, whether or not they had significant discretionary income. This "all or nothing" approach to skills capacity and utilization, which began in earnest even prior to the twentieth century, is gradually being reflected in our housing market offerings as well.

We're used to thinking that money for extensive deep learning requirements, can always come from "somewhere". But how true is this now, especially as governments increasingly struggle to subsidize healthcare, and healthcare insurance can scarcely remain within budget without plenty of assistance from healthy individuals? What happens to the concept of complete taxpayer obligations for government supported knowledge use, when only a quarter of the workforce has access to the core workplace positions that are the main revenue source for this organizational pattern?

Not long ago, Brink Lindsey wrote an article which particularly emphasized the core employment that actually exists in the present. Yet this core revenue, is what society has come to expect for the vast majority of today's non tradable sector requirements. He refers to "a well-educated and comfortable elite comprising 20-25 percent of Americans" which are thriving", yet outside of this group one finds "unmistakable signs of social collapse." Might the main reason for social collapse, be due to the fact that peripheral employment revenue is not deemed a worthy source of wealth creation, by our non tradable sector institutions? Given this circumstance, is it any wonder the focus instead has been on creating "livable" wages?

And I highlight 25% here as a hopeful estimate, given the 20% extent of core employment which could be the near future low end of this economic reality. As Lindsey stressed, the definition of working class has changed. Furthermore, he believes the loss of jobs these groups once performed, should be a social positive, instead of a negative.

Is it possible to bring more meaningful work, to those no longer expected to perform the mind numbing work that was once such an important part of the workplace? One can at least hope. If only a quarter of the population can support the status quo through core employment, perhaps the remaining three quarters will finally get the chance to generate new and more sustainable forms of wealth, beyond the status quo.

Monetary Policy and the Politically Possible

Would temporary price targeting be an improvement for the Fed? At the very least, it could provide limited means by which central bankers are better able to manage problems at the zero bound. Even though "temporary" seems like so little, especially since prices aren't the most relevant consideration, temporary price targeting might be politically feasible. Hence Scott Sumner was encouraged at a recent conference, by a paper which Ben Bernanke presented (Here's an abbreviated version).

Granted, temporary price targeting is a long way from the level nominal targeting rule that would be preferred by many market monetarists. Nevertheless, this may be a step in the right direction. Of course, it's worth pondering: What is it about a nominal level target - especially one that takes nominal income into consideration - which appears politically unfeasible? Or, why is a broader commitment to the maintenance of total spending capacity, still being rejected?

Perhaps the nature of the dominant services economy is part of the problem. Unlike the readily quantitative output of tradable sector activity, much of what takes place in non tradable sector activity - particularly time based services - tells few stories about output that are recognizable in terms of aggregate resource capacity.

However, there's another aspect of this problem as well, which might help to explain some of the ambivalence central bankers appear to have, regarding the stability of aggregate spending capacity. How much nominal income - in aggregate - actually derives from price taking, as contrast with price making? The reason this question is important, is that price taking is a more reliable means of coordinating resource capacity according to broader resource realities.

Whereas price making in terms of nominal income, derives from personal positioning and power in the marketplace. So long as tradable sector activity was dominant, more nominal income derived from price taking for wages and income. It's far simpler to achieve the price taking mechanisms of broad resource coordination, when commodity use definitions for final product are not tied to specific time and place. But with the increased dominance of non tradable sector activity, more nominal income - particularly that of high skill knowledge use - is presently in a position to require demands on resources which don't necessarily reflect aggregate resource capacity. Indeed, the recent income dominance of high skill time based service providers as price makers, could also be amplified by tax law changes.

Only consider that some of the conversation in FOMC minutes in the lead up to the Great Recession, seemed absolutely outrageous. How could policy makers actually laugh, for instance, over the predicament of healthcare practitioners who, due to monetary tightening, were losing customers for elective procedures that were dependent on disposable income? It's hardly irrational, to question whether nominal income demands on general equilibrium in the form of price making, are part of what make central bankers reluctant to consider nominal income as a reliable component of monetary stability.

Does Economics Derive From Normative Foundations?

Perhaps positive and normative economic statements aren't even really all that different, according to a recent paper which was noted at Marginal Revolution. Nevertheless, plenty of economists have long been leery of economic thought with normative implications, since "shoulds" and "oughts" sometimes include an ideological lens which distorts economic framing and the actual resources involved. In particular, Arnold Kling voices his doubts about normative sociological arguments. Recently he wrote:

Mainstream economists do have contempt for sociology. When Robert Solow wanted to write about the causes of sticky wages, he apologized for doing "amateur sociology".

Yet sticky wages - whatever their source - involve more than supply side or policy "shoulds" or "oughts", given the implications they hold for consequent resource capacity and monetary flows. While positive economic discussion is defined as objective and fact based, normative economic dialogue is said to be subjective and value based. Nevertheless, the most obvious long term relevance of sticky wages, occurs via fact based outcomes.

At first glance, resource scarcity may appear as though mostly relevant for positive economic framing. But once resource scarcities become driven by artificially restricted supply side means, they include normative underpinnings (societal assumptions re economic value) which affect the practicality of consequent positive - or normative - economic arguments.

One reason economic discussions could be objectively framed for so long, is the nature of tradable sector activity, which remained dominant for centuries. Since tradable sector product "escapes" so many specific time and place connections, it likewise escapes many of the normative associations of these relatively fixed attributes.

So what has changed? Since today's dominant non tradable sector activity emphasizes both specific time and place, subjective considerations are becoming more relevant. While this circumstance is not particularly helpful at political levels (to say the least), it does highlight the relevance of individual interaction in local settings. After all, time as an economic unit, includes experiential desires and aspirations as part of economic processes. It makes a lot more sense to leave room for "should" and "ought" in individual conditions, than in general equilibrium circumstance.

In order for normative discussions to gain more practical value, why not focus on potential and specific resource use means (what could work), instead of broad generalizations about what doesn't work. For example, when we highlight factors which prevent economic participation, make the moment count, by addressing at the same time, potential means by which individuals might discover new and lasting economic connections.

Time Based Product Affects Aggregate Demand

To what extent does time based product, bear responsibility for lost aggregate demand? This matters, in that high skill services product now requires more revenue and investment, than actual output can readily account for. What we don't know in this regard, continues to translate into increased debt loads as well, for the hidden costs of human capital.

Yet it is no simple matter, to determine the degree to which high skill time based product could be reducing either marketplace output, or potential labour force participation. Even though knowledge capture means less production and consumption of time based product than would otherwise be possible, this "lost demand" factor - due to existing supply side limits - is only part of the story.

Today's organizational patterns for time based product are not only incomplete, but they also turn what could have been discretionary consumption, into non discretionary consumption requirements. Yet it is discretionary income which has the potential to expand the marketplace, thereby generating additional (sufficient?) revenue for non tradable sector activity.

If full marketplace representation was actually in effect for non tradable sector activity and its corresponding non discretionary income, such income diversions might not be so problematic. However, the fact that more revenue is gradually being required for what is still translating into less non tradable sector output, is effectively a reversal of long term progress.

High skill time based product, also serves as a specific geographic and time oriented marker, which in some instances affects how much economic activity occurs within specific time frames. Consequently, the non tradable spatial element, means product formation which is of a more fixed nature than what occurs through tradable sector organizational patterns, given the fact tradable sector activity is not time or geography dependent.

In order for tradable sector activity to provide a sufficient counter to the fixed points (and revenue relationships) of non tradable sector activity, tradable sector organizational patterns need enough dominance so that aggregate demand is not ultimately lost to the insufficient supply structures of non tradable sector product.

Fortunately, there are organizational means which could diminish these spatial limitations, in both time based services, and the housing assets which are now following high income levels too closely. A different approach is needed, to generate new growth beyond the non tradable sector activity which is responsible for excessive limits on aggregate demand.

Even though demand constraints on time based product are problematic for consumers, they are responsible for other pressing concerns as well. Not only have these non tradable sector limits encouraged central bankers to scale back on potential long term growth, they also contribute to serious budgetary issues at the national level. Bottlenecks in both time based product and housing, are translating into further difficulties for Republican policy makers, who are still attempting to subsidize both. In an article for Bloomberg, Michael Strain writes:

The way to keep critics from assuming the worst about your intentions is to say exactly what you want to do.

Alas, saying what government actually means to do is difficult, especially a national government which is compelled to offer something for everyone who is in a position to give back. Nevertheless, governments now face their own extensive non discretionary budget requirements, which include heavy doses of 20th century quality standards for input driven time based product.

These 20th century requirements have gradually become less affordable for the 21st century, especially given the fact of economic stagnation. Granted, no one wants to take away superior quality product, when and where it remains possible to provide. Just the same, why not begin the process of building new forms of quality product which are less budget dependent, so that time based services will not have to make such extensive future claims on aggregate demand.

Deep Learning in a Time of Increasing Automation

Might deep learning roles continue to evolve in future workplaces, so as to include individuals and not just machines? To what degree will we retain the ability to choose areas of deep learning which also hold economic and social rewards? Answers to questions such as these, are important for people from all walks of life.

One reason it helps to distinguish potential rewards factors, is that so many individuals (wherever possible) choose deep learning for purely personal rewards, even when monetary or social rewards aren't part of the equation. While individuals have pursued deep learning through books for centuries, the digital realm now offers far more extensive possibilities.

Nevertheless, there's a paradox in this recent digital bounty. How do we fully appreciate these added learning possibilities, given the fact there are somewhat limited means to make deep learning count for society as a whole? Given these circumstance, digital learning possibilities don't seem as advantageous as would otherwise be the case. While the internet enables personal learning challenges; by the same token, it's no simple matter to share in personal knowledge quests or applications with others, without the requisite degrees. Also, some who are naturally inclined to pursue informal learning for personal rewards, may struggle to continue these quests during life periods when one's basic ability to survive is being tested.

Consequently, individuals may not be able to sustain either informal or formal deep learning, especially when they choose intellectual paths where economic rewards are not likely. Yet no longer is this merely a problem for "impractical" deep learning, as more pragmatic and hands on forms of deep learning will increasingly face the inroads of workplace automation, in the decades ahead. We have been caught in too many debates about the relative lack of economic value for many disciplines, when in reality, automation continues to erode the aggregate economic value of our supposedly most pragmatic fields of study.

Hence one of the main challenges of our time, is to create new knowledge use platforms which can better integrate both deep learning and learning specific formats into our social networks - especially since automation will take advantage of both. Since automation will do some of the heavy lifting for us, it will become easier to set aside time in a day for interaction which is low skill but holds other personal meaning. Even though full monetary rewards aren't possible for these forms of knowledge networks, we can still do a better job of securing survival means, so that individuals might continue pursuing deep learning, who do so for the emotional and intellectual rewards of the challenge.

What about deep learning in knowledge use systems? Deep learning would be compensated in small increments, as time arbitrage smoothes the human capital investment costs of deep learning through peer to peer assistance. Plus, deep learning is not always a necessity to participate in time based service interaction, since complicated but learning specific material can be divided into components which simultaneously generate more consumption access - much as earlier divisions of factory labour meant greater access to an expanded tradable sector marketplace.

Even though technology will likely negate some of the monetary compensation for deep learning, we can respond by exploring how we most want deep learning to contribute to our interactions with others. When we replace the concept of labour with the concept of time value, we have a more rational response to the roles we might assume alongside technology. Time value as a commodity unit, serves as a vessel in which experiential and pragmatic knowledge use can take place.

Best, by placing the economic value on the reality of our mutual time preferences, we give ourselves a break and remove the necessity of determining the level of skill that is supposedly "necessary" for each reciprocal interaction. These expectations for specific skills levels have proven problematic, for they have assumed the provider has all the pertinent knowledge input (both in education and healthcare) while the recipient has none. The reality has often been quite different.

Organizational Patterns and the Safety Net Factor

Are we as modern as we believe ourselves to be? In a recent post, Shane Parrish notes some of the organizational patterns in use today, and finds interesting parallels with the ways people structured their daily activities in Victorian London:

Would you be surprised to learn that in Victorian London (the nineteenth century), the vast majority of people ate their food on the run? That ride sharing was common? Or that you could purchase everything you needed without ever leaving your house?

Parrish also emphasized that since no safety net existed for many individuals, the competition to sell was fierce. Then, he continues:

Maybe ways of organizing come and go depending on time and place. When things are useful, they appear; as needs change, those things disappear. There really is no new way of doing business. But we can look at the impact of social progress, how it shapes communities, and what contributes to its ebb and flow.

Is nothing really "new under the sun"? If there's "no new way to do business," I believe that may only apply in a general sense. After all, business organizational patterns which provide mutual assistance in the form of time based safety nets, are conceptually different. And if people can plan for their safety nets at the outset, they become more likely to sell the scarce time to others which they are most inclined to part with, based on their underlying priorities. Those time preferences don't necessarily follow the same patterns that employers tend to seek. Unlike the government redistribution which subsidizes time based production, this time arbitrage process would need no redistribution, for it makes new wealth possible via internal coordination.

Consider why internal coordination makes such a difference. Even in the best of circumstance: Should automation take the place of extensive workplace participation, the resulting guaranteed income would not suffice for the time based product which individuals still seek. Put simply: Redistributed revenue can't sufficiently scale to match the present day requirements of today's non discretionary consumption patterns. Which is particularly why new organizational patterns are needed, for the kinds of services many individuals would prefer not to have automated.

Why has the need for new organizational patterns not become more evident, already? Those who are empowered for decision making processes such as these, are the ones least likely to experience these kinds of time based coordination problems. Many would instead seek to redistribute income, after automation reaches a certain point of marketplace and workplace saturation. Meanwhile, policy makers have not really remembered how difficult it is for lower income levels to access a full range of time based services which others take for granted.

Also important, is the fact spontaneous resource coordination processes continue to shift upward. In some ways, this process has actually been going on a long time. For example: In the 19th century, physicians finally gained the ability to drop their lower tier of healthcare practitioners which included people from all walks of life, even as they moved their middle tier group (some education) to a level which approximated higher levels of skill. More recently, particularly since the Great Recession, mortgage availability is no longer available for those whose middle class standing has not also shifted upward. It's too easy to forget that everyone needs useful economic functions and ownership options, whatever one's level of ability may happen to be.

Expecting everyone to shift economically upward is nonsensical. The fact that aggregate income can't accomplish this for everyone, has led to many irrational outcomes. Perhaps our environments would be more rational, if the economists who argue against raising minimum wages (which does make sense for full economic participation), would also invest in non tradable sector asset and consumption opportunities for small incomes. After all, no safety net can really be effective, so long as non discretionary costs are not taken into account. It's time to organize more life patterns so as to reflect the income that many individuals actually receive.

General Equilibrium Capacity: Rising, or Falling?

Might general equilibrium capacity be lost within a relatively short period of time, in the U.S.? Let's hope not, especially if Kevin Warsh is chosen to chair the Fed. And even if we are fortunate enough to gain someone who understands the danger of excessive monetary tightening: Without a level nominal target in place, supply side shocks could still mean more inappropriate responses from central bankers that may negatively impact equilibrium potential.

However, supply shocks are somewhat different, from the real economy effects of tradable and non tradable sector dynamics. While supply side shocks often lead to short term economic effects, the dynamics of sector formation are more likely to contribute to long term effects. And the present organizational structure of non tradable sector activity, includes a crowding out effect which - if not addressed - could eventually lead to equilibrium loss.

General equilibrium capacity can be expected to rise, as has been the case in recent centuries, so long as tradable sector activity continues to expand. Even though much tradable sector activity has moved well beyond its earlier beginnings in today's advanced economies, national income is greatly supplemented through direct investment links with tradable sector capacity around the world.

Nevertheless, the extent of general equilibrium capacity at a national level can be difficult to discern, for much of it is supplemented with the time based product of non tradable sector activity - especially through redistribution and governmental debt structure. A nation's asset formation in particular, can reflect the equilibrium circumstance of multiple nations. Since the Great Recession, general equilibrium capacity in advanced nations has been somewhat reduced, since central bankers shifted nominal income to lower growth trajectories. Even though the process is occurring in slow motion, general equilibrium capacity continues to be reduced in advanced economies.

The growth potential of service based economies can be misleading, since today's time based services lack a resource based point of wealth origin. Fortunately, it is not necessary for entire service structures to be supported via debt and fiscal means which lack the ability to contribute to real economy growth. If rising equilibrium capacity is on the horizon, we need a better approach to aggregate skills potential. In the meantime, our institutions continue to cherry pick from vast quantities of skills potential, in ways that would only deplete general equilibrium dynamics in the long run.

Time value could also become a point of resource and monetary origination, in the form of a recognizable commodity. This process would actually allow time value to function as a locally tradable good, which is why time arbitrage would become a direct contributor to equilibrium capacity. By allowing time based units to function as vessels for the storage and activity of knowledge and skill, advanced nations could gradually regain equilibrium capacity, via the active use of human capital. Indeed, the sooner the process can begin, the better, so we can finally return to the long term growth trajectory which - prior to the Great Recession - was our monetary means for a more inclusive society.

Practical Healthcare Markets are Still Possible

Today's healthcare has become one of the more important economic factors which exacerbate political division in the U.S. But how has healthcare's present organizational capacity, contributed to this result? These thoughts were on my mind as I recently began reading "The Social Transformation of American Medicine". Even though the book was published more than thirty years ago, much of what it details, still appears relevant now.

Lester King in the above JAMA link, gave a favourable review of Paul Starr's book, and his quibbles were mostly minor. Among King's concerns, was Starr's generalization of certain historical factors, Likewise, my first impression is that Paul Starr may have overly generalized healthcare's level of authority over citizens and other disciplines. Nevertheless, enough authority exists, that more citizens now seek healthcare as defined by professional specialization and deep learning, than practitioners are actually able to provide.

Little more than a century ago, scarce anyone had reason to complain about supply side limits, since lay practitioners from all walks of life were still at work - especially in rural regions where doctors were few. Among the lay practitioners who were most effective, were those who emphasized the botanical remedies which were ultimately absorbed by the healthcare of our time. While botanical remedies were once a major aspect of rural self sufficiency, the practitioners who continue to emphasize botanical remedies now, are mostly found in prosperous cities with little access to rural America.

Individual autonomy has preserved the ability of physicians to undertake deep learning which requires extensive education and commitments for human capital investment. I certainly respect their desire for autonomy, their ability to provide a quality product, and their wish to live and work wherever they desire. However, the healthcare marketplace which exists today, is mostly available for individuals who are still able to assume active roles in city life. Since our government is quickly becoming less able to reimburse individuals who cannot fully reciprocate for healthcare, and many rural citizens remain in an excessively dependent state, physicians may eventually seek means to deal with this major societal issue.

Fortunately, it is possible to generate a more practical healthcare marketplace, even as physicians seek to preserve their hard won autonomy. We could create new organizational patterns which make divisions of "labour" that require deep and extensive learning, less of a necessity. One way to accomplish this is through time arbitrage, in which the purchase of time value for time value, does not pose issues for the price points and human capital investments of today's healthcare.

Addressing supply side deficiencies is vitally important, especially for those who lack for the resource capacity or income to fully compensate deep learning requirements. Given the fact automation proceeds apace with both deep learning and learning specific methods, learning specific methods for individuals would certainly be a reasonable approach. Since only about a quarter of today's workforce has the well compensated work with benefits that is capable of supporting deep learning, and insurance can't absorb the difference, it's time for a new approach, to practical forms of knowledge use.