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Carl Wells

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80
Date
2022/05/30
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ML Score
4
Job
Systematic Equity Partners | Founder
Content
Statistician George Box said: “All models are wrong, but some are useful.” Unfortunately, “Economists are like artists. They tend to fall in love with their models.” The art of economics involves distinguishing between attractive models and useful models.The traditional bedrock of economics is demand-and-supply model. Every introductory economics course explains how demand and supply are related to price and how equilibrium price is where demand is equal to supply. This can be a very useful model for predicting how changes in demand and supply affect prices and trades — if we make the tempting assumption that market price is equal to equilibrium price. Prices do respond quickly to changes in demand and supply in some markets — the stock market is a prime example — but prices in other markets are little affected by market forces. The labor market is not at all like the stock market. If a newly minted #PhD from an elite #university were to contact a college dean and offer to take the job of a current professor for a 10% lower salary, the dean would not consider the applicant. #Professors with jobs do not have to take pay cuts to fend off replacements. There is no daily auctioning of jobs for professors or most other occupations — which can leave job seekers unemployed or employed in jobs for which they are wildly over-qualified.There are good reasons for job security and sticky wages. Would you move to a new city and take a job with a new company if you were in constant danger of having your job auctioned off to the lowest bidder? Yet, historically, economists treated the labor market as if it were an auction market in equilibrium. Everyone who wants to work at the prevailing wages has a job. Those who are unemployed choose to be unemployed.There’s more. Labor demand in this model is determined by labor #productivity and labor supply is determined by workers’ willingnes
Property
Integromat
Link
https://www.linkedin.com/feed/update/urn:li:activity:6936969260648824832
Comments
33
Type
tful
Profile
https://www.linkedin.com/in/carl-wells-a57a384/
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