28 February 2011

Excuse Me Dr. Barro, Your Ideology Is Showing

Economist Robert Barro has published this anti-union Op-Ed in The Wall Street Journal today. Pretty predictably, he wants to blame the fiscal crisis in the states on unions. Is there actual empirical evidence that, as Barro puts it, " the structure of strong public-employee unions . . . helped to create the unsustainable fiscal situation."* It would be nice to see it. The reason why Barro presents none is that, as far as I know, there is none to present. Even an economist should be able to do better than that.

Barro does present some evidence that right-to-work laws promote economic development. There is no real surprise that right to work states attract more robust corporate activity than more union friendly states. Of course they do. Corporate investment goes where companies don't face any countervailing power. And what about relative wages and benefits in those states? I don't know the empirics in any detail, but I am wagering that there are pretty impressive distributive consequences of disallowing unions. (Have a look at this report from CNN for some initial warrant on that score.) Surely Dr. Barro wouldn't want to discount the massive inequalities that untrammeled corporate power (and markets are meant to be power free zones, no?) generate!

As a theoretical matter Barro presses the claim that "collective bargaining on a broad scale is more similar to an antitrust violation than to a civil liberty." Of course that requires that we ignore the power asymmetries that exist in virtually any labor negotiation between an employer and individual employees. The historical corollary of this theoretical complaint is that Barro seems to want us to head directly back to the late 19th Century, to a time when the state imposed atomization on the labor market and thereby enhanced the power of employers. In other words, Barro doesn't like the way democratic politics has reshaped labor markets by sanctioning collective bargaining. After all, the Wagner Act (1935) cleared Congress and was signed by Roosevelt.

In this essay Barro displays a problem to which economists are quite susceptible: they too readily allow their ideology - usually some facile version of libertarianism - to impede their analysis. We know in general terms what markets (there is no such thing as "the market" except in the world of right leaning ideology) require to work effectively. We know too that allowing collective action can offset biases that prevent effective functioning of markets in atomized settings. There are lots and lots of efficient market outcomes. There is no reason why we ought to opt for the most asymmetrical and unequal of those on offer. At least nothing Barro says here suggests that we should.
* Since he is preoccupied with Wisconsin, is there any evidence that the public employee pension system is in trouble there? Barro implies that it is, but offers not a shred of evidence.

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