Morgan O. Reynolds

Post-Fisc Distributions of Income in 1950, 1961, and 1970

Distributions of income after allocating all government taxes and expenditures to households are compared over two decades. Extending prior work back an additional decade and adding extensive sensitivity analyses leave our earlier conclusions unaffected. Specifically, despite efforts towards a more egalitarian distribution and a sizable increase in benefits accruing to the low end of the distribution, aggregate income dispersion in final distributions changed very little between 1950 and 1970.

The myth of labor’s inequality of bargaining power

This paper argues that the widespread belief in labor’s exploitation and “underpayment” in a free market economy is illogical and lacks a serious empirical foundation. Theories of systematic disadvantage ignore the behavior of entrepreneurs under the profit-and-loss motive and the tendency for risk-adjusted rates of return to equalize. Labor has proven versatile and mobile in the U.S. economy, where technical progress also has been extraordinarily labor-saving. Nor have discrimination (when unaided by the public sector), fluctuations in unemployment, or formal collusions resulted in systematic underpricing of labor services.

Understanding political pricing of labor services: The Davis-Bacon Act

Examples of divergence between the intended (stated) and actual consequences of government intervention in the marketplace abound. In this paper, two legislative attempts to specify wage rates on government contracts are analyzed. The Davis-Bacon Act has been successful in forcing government contractors to pay the prevailing union wage rate. In contrast, the Walsh-Healey Act has been ineffective in establishing minimum wage scales on most government contracts. Analysis indicates that the success of one and the failure of the other is due to differences in enforcement costs, special interest group support, the concentration of opposition, and the narrower scope of Davis-Bacon.

Whatever happened to the monopoly theory of labor unions

This paper argues that unions act in accord with the conventional cartel or monopoly model. The basic premise is that it is useful to ask what a “union maximizes” because if more wealth is available, union decision-makers have an incentive to capture it for themselves or their membership. In the formal model, unions negotiate wage rates which maximize the monetary surplus above the supply price of labor, providing an endogenous answer to the questions of how union employment and wages are simultaneously determined. Comparative static analysis yields empirical predictions about the behavior of union employment, wage rates, and union-nonunion wage differentials.

The Fading Effect of Government on Inequality

Most of those who discuss the question of income distribution exaggerate the power of government to change it. This is because they fail to examine the historical evidence. Of course, Pareto, the father of the modern analysis of income distribution, had little confidence in governments power to alter the distribution permanently. But the sheer bulk and power of the modern welfare state have led many to depart from Paretos view. In a recently published book (Morgan Reynolds and Eugene Smolensky, Public Expenditures, Taxes, and the Distribution of Income, New York: Academic Press, 1977), we showed that when the benefits of all government expenditures were added to the labor and capital incomes of U.S. households and the burden of all taxes was subtracted, the overall distribution of income had not changed significantly between 1950 and 1970. To be sure, the distribution of income which included the effects of government budgets was significantly closer to equality than the distribution made up of just labor and capital income, but we could not detect any significant trend in the degree of inequality. Our best estimates showed, for example, that the lowest twenty percent of house-

The free rider argument for compulsory union dues

This paper examines the free rider argument for compulsory union dues. The contemporary theory of collective goods does not support the union argument because a free rider problem is not a sufficient condition to rationalize the private use of coercion. The paper evaluates quantitative data on union security and applies the theory of local public goods to union services. The focus is on efficiency aspects of security arrangements.

Searching for Explanations

The stability of inequality is a source of distress to all sensitive egalitarians. [K. Boulding 1975, p. 1]

An interview with W. H. Hutt

W. H. Hutt is 85 years old and is one of the most important economists of this century. That this is too little appreciated is largely because his academic career did not take place in his native England. Instead, in 1928, after a short career in publishing, the graduate of the London School of Economics set sail for South Africa and the University of Cape Town. During his 37 years there, Professor Hutt produced an impressive body of work, some of which have become classics among his devotees, includingThe Theory of Collective Bargaining (1930),Economists and the Public (1936),The Theory of Idle Resources (1939),Plan for Reconstruction (1943),Keynesianism — Retrospect & Prospect (1963), andThe Economics of the Colour Bar (1964). Hutt came to the United States in December 1965 to serve as a visiting professor at the University of Virginia, and has served in a similar capacity at many American universities. While in the United States Hutt has produced such works asThe Strike-Threat System (1973),A Rehabilitation of Say’s Law (1975), andThe Keynesian Episode (1979). Professor Hutt currently is Emeritus Visiting Professor of Economics at the University of Dallas and he continues to work on an autobiography and a new book, tentatively titledLabor’s Disadvantage.

Production costs and deregulation

4. ConclusionUnlike some of the existing literature, our discussion implies that either (1) regulation lowers production costs and makes the gains to deregulation relatively small or (2) regulation increases production costs and makes the social and political gains to deregulation relatively greater. While some may not find alternative (1) credible, one thing is clear: claiming that the deregulatory gains are small because regulation increases costs is not an alternative society faces.

4 – Empirical Results

Economics needs induction and deduction, but in different proportions to different purposes. [Alfred Marshall 1948, p. xix ]