Paul writes: > Jim asks why we don't debate/explore theoretical questions more. > To me the answer is easy. For the political, ephemeral questions > that dominate the list (and which I enjoy as much as anyone else), > it is easy to drop a line or two in response. For the kind of > issues Jim wants us to debate, it is both time consuming and > 'difficult' to respond -- by difficult I mean one has to almost > write a paper to respond. I (for one) just don't have the time... This is a real problem, obviously. But not all theoretical messages have to be long. After all, what you say below basically agreed with what I said. And some questions evoke short answers. For example, I suggested that Gil Skillman's story of why higher wages don't automatically lead to falling employment didn't work in the longer run, when costs are no longer fixed. It's easy enough for Gil to say: no, my model has already dealt with that issue, and then present a quick prose summary of _why_ his theory works in the long run. He doesn't need to present the math. (The math usually shows the logical consistency of an argument rather than explaining the key issue, i.e., the causality behind the argument; I'll trust that the argument is consistent. Besides, math is hard to send via e-mail.) I am sure Gil is busy with grading exams and the like, so I can understand why he didn't respond. But messages don't have to be long. > Nevertheless, I will respond a little beyond the brief comment I > made to Jim previously. > The neoclassical labour market model is so hopelessly irrelevant > to the real world that trying to 'justify' minimum wage, unions, > etc. to the determination of wages and employment in neoclassical > terms is a waste of time and effort. Richard Lester (1940s or 50s) i > in his empirical work showed that managers, faced with rising wages, > readjusted their labour processes to increase the productivity, at > given prices, to validate wages. Thus, contrary to the neoclassical > view, productivity adjusted to wages, not employment. Maclub, of > course, disputed this view on neoclassical grounds, but, I would > argue, Lester had it right. Lester, whose work I haven't read but have seen cited, anticipated the fad of the efficiency wage hypothesis that seems to have come and gone without much or any impact on the textbooks. I think he's right. But in the long run, when fixed costs stop being fixed, don't profit-seeking managers start thinking about relocating to where wages are lower? in some ways, we in the US are living in the long run at this point. > The basic problem with neoclassical economics is its static, > equilibrium model. (Well, actually, there are so many basic > fundamental problems with the neoclassical model that it would > take much too long to elaborate.) But, what (in the context of > minimum wages, unions, etc.) it fails to deal with is the dialectic > between wages, organization of work, worker productivity, and macro- > economic acitivity within the community. It also assumes things > like positively sloping supply curves of labour (empirically > falsified), competative labour markets, (also empirically falsified) > and all of the other mysifications of the neoclassical labour > market. Yes, neoclassical economics should be rejected. But some of the pieces of their theory seem to have something to say, like the theory of bilateral monopoly. Books like Card and Krueger on the minimum wage, Blanchflower and Oliver on the "wage curve," and Frank and Cook on winner-take-all markets have something to say even though they are on the edges of neoclassical orthodoxy. > Jim and I face the same problem when we try to teach labour market > economics (I hope I am not presuming on your teaching Jim?) The text > books all show an upward sloping supply curve of labour and a downward > sloping demand curve for labour. The fact that neither is empirically > correct, nor is there any consideration of the interaction between > wage, participation, work organization, or hours employed in the theory > is a scandal on economics (perhaps not the least scandal). Jim, > I see your point and I agree with it. But are we just to be > a crying circle of misunderstood dissidents -- or what do we do > about it. The textbooks are HORRIBLE. The Kaufman labor economics text, which people on pen-l said was the best of a bad lot, was no exception. The best we can do is to produce a new textbook. In my teaching, I follow a strategy that works if I have enough time: I introduce the standard crap and then talk about a new more sophisticated (hype, hype) approach that presents a more realistic picture that give results that contradict the standard crap. Efficiency wage theory, for example, is easy to explain (especially if one breaks off from the one-dimensional approaches like the Bowles/Gintis "contested market" approach that emphasizes only the principal/agent problem).
