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How Deteriorating Highways Cause Deteriorating Wages: Musings on the Importance of Transaction Costs

Much of my work as an economist is built upon the insight of a book written in 1826 by Johann Heinrich von Thunen, called “Der Isolierte Staat”, which is translated, “The Isolated State”. In it, he presented a model of land use that suggested where various crops would need to be produced, given the cost of transportation of the crop to market.

Deteriorating roadAs I was thinking about von Thunen’s theory, it occurred to me that when used in conjunction with how the wage rate is set in a market economy — equal to the value of the marginal product of labor — it provided insight into how a deteriorating highway infrastructure — as we have in the United States — could explain in part the wage stagnation. My point in what follows is not that it explains all wage stagnation, or even a large part of wage stagnation, but only that it can be seen from a theoretical standpoint to explain some wage stagnation.

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This is a new blog that I hope to post to at least once per day.  I want this to be an outlet for sharing ideas related to my work on climate change and agriculture, GIS, remote sensing, econometrics, and programming.  I will try to use categories to help the reader rapidly find the content closest to their interests. Happy reading!