Galbraithian economics: Countervailing power edition
It is John Kenneth Galbraith’s world. We simply live in it.
I have always found it interesting that economists have worked so hard to pretend that we do not live in John Kenneth Galbraith’s world. Harvard University’s Andrei Shleifer once remarked to me that the collapse of Galbraith’s influence—that there were next to no “Galbraithians”—was a very interesting puzzle in the history of economic thought.
But now there are some Galbraithians!
In a new working paper released earlier this month, “Unions and Inequality Over the Twentieth Century: New Evidence from Survey Data,” co-authors Henry S. Farber, Daniel Herbst, and Ilyana Kuziemko at Princeton University and Suresh Naidu at Columbia University write:
U.S. income inequality has varied inversely with union density … But moving beyond this aggregate relationship has proven difficult, in part because of the absence of micro-level data on union membership prior to 1973. We develop a new source of micro-data on union membership, opinion polls primarily from Gallup (N ≈ 980, 000), to look at the effects of unions on inequality from 1936 to the present. First, we present a new time series of household union membership from this period. Second, we use these data to show that, throughout this period, union density is inversely correlated with the relative skill of union members. When density was at its peak in the 1950s and 1960s, union members were relatively less-skilled, whereas today and in the pre-World War II period, union members are equally skilled as non-members. Third, we estimate union household income premiums over this same period, finding that despite large changes in union density and selection, the premium holds steady, at roughly 15–20 log points, over the past eighty years. Finally, we present a number of direct results that, across a variety of identifying assumptions, suggest unions have had a significant, equalizing effect on the income distribution over our long sample period…
And, indeed, I did eventually write up my take on the answer to Shleifer’s question, in a review of Parker’s biography of Galbraith:
If there were justice in the world, John Kenneth Galbraith would rank as the 20th century’s most influential American economist. He has published several books that are among the best analyses of modern U.S. history, played a key role in mid-century policymaking, and advised more presidents and senators than would seem possible in three lifetimes. Yet today, Galbraith’s influence on economics is small, and his influence on U.S. politics is receding by the year. In this lively and thoughtful biography, Parker sets himself the task of explaining Galbraith’s career: why it was so dazzling, and why its long-term impact has turned out to be so much less than expected. The result is not only the story of a smart, witty, and important man, but also a fascinating meditation on the rise and fall of twentieth-century American liberalism.