Variance eaten up by extreme means (truncation)

If scales are continuous and limitless, variance and means are two different things. If scales are limited, however, this is not the case: towards the bounds, there will be substantially less variation than toward the center of the scale because of censoring.

The issue arose when we wanted to see whether there was divergence or convergence of job quality in Europe. If the scale was wide, the evolution of the variance would tell this, but if the scale is limited and the average moves towards one of the bounds, the variance will be wrongly considered to indicate convergence.

As a solution, I would compute some kind of one-tail variance on the longest tail if the other is strongly censored, hence assuming the latent distribution is symmetric. I have not seen such a measure yet, but it is easy to calculate.

In a way, it is a measure that should be possible to derive from truncated regression. It would be nice to do that.

Variance eaten up by extreme means (truncation)

If scales are continuous and limitless, variance and means are two different things. If scales are limited, however, this is not the case: towards the bounds, there will be substantially less variation than toward the center of the scale because of censoring.

The issue arose when we wanted to see whether there was divergence or convergence of job quality in Europe. If the scale was wide, the evolution of the variance would tell this, but if the scale is limited and the average moves towards one of the bounds, the variance will be wrongly considered to indicate convergence.

As a solution, I would compute some kind of one-tail variance on the longest tail if the other is strongly censored, hence assuming the latent distribution is symmetric. I have not seen such a measure yet, but it is easy to calculate.

In a way, it is a measure that should be possible to derive from truncated regression. It would be nice to do that.

Why social bargaining?

Much of the research I do centers around social bargaining. Time and time again, social bargaining advocates need to withstand the intuitive logic of perfect competitive markets. Their stance however is obviously biased by self-interest.

I try to sum a few point that in my view are essential in justifying social bargaining.

1. Social bargaining is insider-oriented. It unites workers and companies already employed and functioning. While this implies that often outsiders are forgotten and the government would need to intervene, in most cases they have a shared interest in improving the economy. Politics, because of the majority rule, may changes sides much more often and creates instabilities. When reflecting on, for example, European economic policy established the European monetary area, it is clear many decision have been unwise and had no economic, but rather political ends.
2. There is - in my view - a fallacy in the way we intuitively think about economic decisions. As we see demand and supply curves, we believe companies en employees think in such terms. While to some extent this may be the case, many relations come about by selection: the companies and workers that do not comply to the economic laws are ruled out. The remaining actors either are aware of these laws, or they are too a large extent ignorant of this, which is what I believe is way more common then we would expect. The reason we don't is that people who think about the economy are smart and have models in mind. People that make up the economy don't. This is where social bargaining comes in: shared experience over time may lead to more sensible pay scales, working condition, etc. then one could come up with himself. This is hard to admit, but I'm afraid it is true.
3. Sometimes, having perfect information (but imperfect control) can lead to micro-economically well motivated decisions, which turn out wrong at the macro level. In fact, wages are the best example of such dynamics. Every company would like to minimize costs (remember point 2: they might simply not survive otherwise), and wages are a cost. I am aware that wages should equal marginal productivity, but when marginal productivity goes to zero, so would wages. So when wage have a tendency to go down or, because of market imperfections such as monopsonies, the firm will profit. However, if every firm behaves in this way, aggregate demand drops. Therefore it is better to consider a coördinated pay level. Social bargaining does just that. In addition, for wages, it is accepted that in the medium run productivity adapts to the wage level, not the other way around. If one wants to direct the economy toward capital intensive, innovative industries, this can be done through social bargaining.