A Critique of What Do Unions Do?

P rofessors Freeman and Medoff have created quite a stir with What Do Unions Do?—the first substantial pro-union book by economists in decades. The book has drawn an extraordinary amount of (mostly favorable) attention, with articles in magazines such as Business Week and Fortune, a full-scale symposium in Industrial and Labor Relations Review, and coverage in many academic journals. All the attention, in my view, says more about what articulate opinion wants to hear than what is true. There always has been abundant pro-union writing in the academic community, but economic analysis and many economists continued to stand in the way of the complete celebration of unionism. Freeman and Medoff do not frontally attack the economics of trade unionism, although the book is the centerpiece of the Harvard school's campaign to neutralize the traditional monopoly/cartel analysis of unions. An accurate subtitle for the book would be The Case for Worker Collectives. The case is weak. Freeman and Medoff (F-M) offer no coherent theory, integrated with general economic theory, to displace the core theory. Instead, they acknowledge that "most economic studies, implicitly or explicitly, have judged unions as being a negative force in society" (p. 4). This admission gives an appearance of balance and accommodates the fact that many economists perceive the similarity between labor combinations and other producer groups who try to raise their prices by restricting access to markets. Given the obvious validity of the economic model, union apologists must shift the ground of the debate. F-M claim that there is a "shortage of statistical evidence concerning what unions do beyond raising wages that set the stage for our research agenda" (p. 4). My unsympathetic translation is: set economic reasoning aside; number crunching from Harvard will deliver the truth. This stretches credulity beyond the breaking point for most economists, much less Austrian economists.