Work the problem in index space

• Monopsony, Rigidity, and the Wage Puzzle (Wonkish) - Paul Krugman

Let us start with an assumption.  Labor transactions, in  aggregate, contribute a  finite amount of 'significance' to the economy.  Significance is the amount of trade space a labor transaction gets. If we had a random sequence generator that produced a typical labor transaction set  over the finite space, then the path length through the generator is significance.  This is the finite bandwidth approach.

What else takes up trade space? Guv regulations and fees, about 20% these days, Employers treat that 20% as the algebraic wedge, trade book uncertainty.  Employers are trying to fill index space, the 80% they get. Wage settings become sparse, they are separated by the trade book uncertainty. They will be low precision, low rank in their generators. 

Guv has to drop that wedge to 10%, otherwise labor cannot make guv interest cost.

We have better economics in the sandbox.