Research Handbooks in Law and Economics series
Edited by Cynthia L. Estlund and Michael L. Wachter
Chapter 3: Economic analysis of labor markets and labor law: an institutional/industrial relations perspective
In the 20th century two intellectual traditions were the most influential in the American field of labor economics. The first was the tradition of institutional economics (IE) and its close offshoot industrial relations (IR), the second was the tradition of neoclassical economics (NE). This cleavage is refracted into the modern field of labor law where on one side is an IE/IR-oriented traditional approach to labor law (e.g., Deakin and Wilkinson 2005; Estlund 2006; Arthurs 2007) and, on the other, a largely NE-inspired law and economics (L & E) approach (Schwab 1997; Posner 2007; Medema 2010). The institutional economics/industrial relations (IE/IR) approach had its original home base at the University of Wisconsin and was led by John Commons; after the 1930s it evolved and expanded to include a neo-institutional branch centered in industrial relations and headed by non-Wisconsin labor economists such as John Dunlop, Clark Kerr, Richard Lester, and Lloyd Reynolds (McNulty 1980; Segal 1986; Kaufman 1988, 2006). Johnson (1975) refers to this tradition as the “old labor economics” and notes that it was partially separated from the main body of economics by its cross-disciplinary approach to theory-building, critical stance toward the competitive core of neoclassical theory, and neutral-to-sympathetic attitude toward trade unions and labor law. Other intellectual traditions, such as socio-economics, economic sociology, and comparative institutional analysis from political science, also feed into modern-day IE/IR.
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