| I only saw this comment today, after you referred to it in another one. Yesterday was Christmas, after all. I'm afraid I've lost the point of this thread. I say that employment can be viewed as a monopoly, and more importantly, that an employer can abuse those monopoly powers. The standard model says this is correct within the transaction cost interval. I agree with this model, which is why I asked you: "how large (in $) do you think transaction costs of changing jobs actually is?" I.e., if the transaction costs are $3k, monopsony/monopoly models might explain why someone's wage is $51k vs $53k, but they don't explain why it is $50k vs $25k. I disagreed that your examples of Hostess/etc were related to this model, since the price changes there were far larger than any reasonable transaction cost I could think of. Near as I can tell, Rudanko isn't doing anything different from this. Also, you were correct that I should have said risk-adjusted dollar costs should be used to determine market power. Note, however, that risk-adjusted dollars are not the same thing as P(bankruptcy), which you seem to be using. To conclude, I think your parameter choices are wildly off (e.g., to make your ideas work, I think you need transaction costs proportional to wages). I strongly recommend actually writing down your models (with numbers and math) to clarify your views. |
I am unable to calculate that, nor provide a good estimate. People do strange things for love. Does it always make economic sense? No.
What is the transaction cost of forcing your kids to leave school and boy/girlfriends if the job change requires moving? What is the transaction cost of asking your husband to quit his job and leave the church where he's been a deacon for the last 10 years? I once talked with someone who loves the sea, and couldn't think of leaving away from it. What's the transaction cost, were she your wife, to move her to a better paying job in Oklahoma? Does that include the costs of divorce, should she find that she loves the sea more than you?
What is the economic cost of being considered a "failure" and a "quitter", or "not a team player" by your neighbors and ex-coworkers? Of being disowned by your family for switching from Jehovah's Witness to Southern Baptist? Of being the sole outspoken atheist in a small Bible Belt town?
These can be estimated, certainly, but those estimates feel like post hoc parameter fitting. "If person X won't switch to another job which pays $3k more, then the price on staying is worth at least $3k." With enough parameters you can fit anything.
Can you tell how the various economic models include these factors into the cost model? How do they estimate these various costs I've outlined?
Going into semi-obscure New Mexico history, in the 1950s the 82-year-old John Prather was offered $200,000 for his mule ranch in southern NM, so that White Sands Missile Range could be expanded. The price was well above the going rate for the land, but he was the last hold-out. He was one of the last of the US pioneers to the American West, and he wasn't going to leave. Period. He would rather die in a gunfight than move.
Americans liked the romantic idea of one of the last pioneers still living the old ways, which put pressure on the Army and the police to not force the issue. They gave up, and Prather stayed there until he died.
What would you say is the transaction cost for him to move? Obviously staying there was worth more than $200,000 to him. Was it $5,000,000? Was there any amount of sum which would have gotten him to move? If no such number exists, then can you even use an economic model for this event?
BTW, in our other thread I asked this of you: do monopolies (or cartels, for that matter) ever abuse their monopoly (or oligopoly) powers? If so, do you use moral guidelines to determine what constitutes abuse?