The Institutionalist Tradition in Labor Economics, edited by Dell P. Champlin and Janet T. Knoedler. Armonk, N.Y.: M. E. Sharpe. 2004. Paper: ISBN 0765612879, $29.95. 357 pages.
Institutionalists once dominated the field of labor economics. They should also dominate the field today. As John R. Hicks admitted in 1963, the labor market is a complex, social market: "Wages are not simply determined by supply and demand." Indeed, as John E. Cairnes recognized a century earlier, it is even misleading to speak of "the" labor market since there are, in reality, many labor markets, each "practically isolated from each other." In large part, institutionalism was made for the study of labor markets. (1)
In recent decades, neoclassical economists have come to dominate nearly all economics fields. Yet the conventional wisdom is no match for the march of events. (2) Outsourcing and offshoring are among numerous recent developments leading many citizens and scholars to look beyond mainstream labor economics for a better understanding of the real world and for policy ideas. The time is right for a fresh look at the institutionalist tradition.
A perfect place to begin this reexamination is provided by The Institutionalist Tradition in Labor Economics. Its introduction to institutional labor economics brings together more than two dozen authors for a twenty-one-chapter look at the tradition's history, theories, and contemporary policy recommendations. It will be of particular interest to students dissatisfied with neoclassical economics and to professors looking to supplement their reading lists in courses on labor or economic thought.
Mainstream economists often dismiss institutionalists as dissenters (from standard theory) who offer no alternatives. There is certainly plenty of attention to neoclassical shortcomings in The Institutionalist Tradition. Robert Prasch, for example, attacks the notion that labor is just another commodity; Ann Jennings mounts an assault on the logic underpinning wage theory; and Robert LaJeunesse topples the core economic assumption that humans have a natural aversion to work.
But there is much more in the collection than criticism. Early institutionalist theories and insights of Thorstein Veblen, John Maurice Clark, and John R. Commons (and his students) are examined by Glen Atkinson, Bruce Kaufman, J. Dennis Chasse, and the editors. Post-World War II institutionalist theories of wages (including the concepts of job clusters...