A Neoclassical Exploration
Chapter 2: The Fall and Rise of Labour Monopoly Theory
2. The fall and rise of labour monopoly theory This book contends that that the phenomenon of the collective choice by the workforce of its terms of labour helps explain unemployment, and kindred labour market dysfunctions. The present chapter traces the fluctuating fortunes of this thesis over the twentieth century. It recounts and explains the disappearance of ‘labour monopoly’ theory in the wake of the Keynesian revolution, and its sudden re-emergence in 1980s, after the passing of the doctrinal conflicts of the Keynesian era. The chapter goes on to suggest that, despite the revival of labour monopoly theory since 1980, it holds no more than an indefinite and subsidiary position in macroeconomics today. It is at most merely a rationalization of neo-Keynesian ‘fixed wage’ macroeconomics; and in the minimum it comprises no more than several splinters in the kaleidoscopic state of contemporary macroeconomics. The chapter further suggests that the labour monopoly doctrine remains encumbered by unresolved questions raised by the twentieth-century debates over the approach. Put in general terms, the questions amount to: can the well-developed theory of monopoly in product markets be simply and successfully transposed to labour markets? Or will any such attempt founder on the characteristics that distinguish labour markets from product markets? In addition to these uncertainties about the theoretical coherence of the labour monopoly approach, the approach has been enervated by doubts about its applicability given the steep decline in trade unionism, and the retreat of labour market regulation. The chapter’s review of the travails...
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