Must-read: Suresh Naidu and Noam Yuchtman: “Labor Market Institutions in the Gilded Age”

Must-Read: Suresh Naidu and Noam Yuchtman: Labor Market Institutions in the Gilded Age: “Although 19th century labor markets were unencumbered by regulatory legislation…

…there existed frictions and rents… [that] played an active role in determining labor market outcomes and the distribution of income…. When firms experienced positive output price shocks, their employees earned wage premia…. The existence of rents in the labor contract suggests a role for bargaining and conflict between employees and employers. Workers in the late 19th century
attempted to strike to increase their wages; we present data on the frequency of strikes in the 19th century as well as some evidence suggesting that strikes were correlated with workers’ wages. Employers were supported by institutions of their own: we describe the important role played by the U.S. government in limiting the efficacy of union strikes in the 19th century…. We present new evidence documenting the rise of judicial injunctions that ended strikes, pointing to the important role played by the judicial branch of the U.S. government in structuring (Northern) American labor market institutions prior to the rise of legislative regulation.

Today’s economic history: Oliver Wendell Holmes in Lochner

Oliver Wendell Holmes: Dissent: Lochner v. People of State of New York: “I regret sincerely that I am unable to agree with the judgment…. This case is decided upon an economic theory…

…which a large part of the country does not entertain. If it were a question whether I agreed with that theory, I should desire to study it further…. But I do not conceive that to be my duty…. It is settled by various decisions of this court that state constitutions and state laws may regulate life in many ways which we as legislators might think as injudicious, or if you like as tyrannical, as this, and which, equally with this, interfere with the liberty to contract. Sunday laws and usury laws are ancient examples. A more modern one is the prohibition of lotteries. The liberty of the citizen to do as he likes so long as he does not interfere with the liberty of others to do the same, which has been a shibboleth for some well-known writers, is interfered with by school laws, by the Post Office, by every state or municipal institution which takes his money for purposes thought desirable, whether he likes it or not.

The 14th Amendment does not enact Mr. Herbert Spencer’s Social Statics. The other day we sustained the Massachusetts vaccination law, and state statutes and decisions cutting down the liberty to contract by way of combination are familiar to this court. Two years ago we upheld the prohibition of sales of stock on margins, or for future delivery, in the Constitution of California. Some of these laws embody convictions or prejudices which judges are likely to share. Some may not. But a Constitution is not intended to embody a particular economic theory, whether of paternalism and the organic relation of the citizen to the state or of laissez faire. It is made for people of fundamentally differing views, and the accident of our finding certain opinions natural and familiar, or novel, and even shocking, ought not to conclude our judgment upon the question whether statutes embodying them conflict with the Constitution of the United States….

I think that the word ‘liberty,’ in the 14th Amendment, is perverted… unless it can be said that a rational and fair man necessarily would admit that the statute… would infringe fundamental principles… of our people and our law…. No such sweeping condemnation can be passed upon the statute before us. A reasonable man might think it a proper measure on the score of health. Men whom I certainly could not pronounce unreasonable would uphold it as a first installment of a general regulation of the hours of work. Whether in the latter aspect it would be open to the charge of inequality I think it unnecessary to discuss.

Must-Read: Noah Smith: Unlearning Economics

Must-Read: Noah Smith is pushing me towards thinking that Econ 1 needs to teach a lot more than supply-and-demand plus macroeconomic externalities that can be dealt with by stabilizing monetary and maybe fiscal policy…

Noah Smith: Unlearning Economics: “Right now we’re in the middle of an empirical revolution in econ, and…

…unsurprisingly–a ton of standard, common theories are just not matching reality very well. For example: 1…. Minimum wages should harm employment in the short term. But the data shows that they probably don’t. 2…. A big influx of immigrants should depress the wages of native-born workers of comparable skill. But the data shows… the effect is very small.  3…. Welfare programs barely reduce observable work effort. 4…. Social norms (or morals, broadly conceived) matter to people…. The stuff… [of] Econ 101… are being smacked down by the heavy hand of new data. We’re slowly unlearning economics…. Econ 101 courses around the country probably need an overhaul…. Teachers should still teach the simple, classic theories that the new facts are beginning to kill… but mainly as a way to show how data can tell us when we’re wrong.

Must-Read: Larry Mishel: Uber Is Not the Future of Work

Must-Read: I’m with Larry Mishel here: Why do people think Uber-type companies are an important deal, again? Uber, Airbnb, Craigslist… and what else?

Larry Mishel: Uber Is Not the Future of Work: “The rise of Uber has convinced many… that freelancing via digital platforms is becoming increasingly important…

…[But] a look at Uber’s own data about its drivers’ schedules and pay reveals them to be much less consequential than most people assume… distracts from the central features… that should be prominent in the public discussion: a disappointingly low minimum wage, lax overtime rules, weak collective-bargaining rights, and excessive unemployment, to name a few…. Curiously, the best evidence of Uber’s relatively small impact on the American labor market comes from data released and publicized by the company itself. David Plouffe, an Uber strategist… ‘Here in the U.S., there are more than 400,000 active drivers… half the drivers work less than 10 hours per week… a third of drivers said they used Uber to earn money while looking for a job.’… Driving mostly for supplementary income on a transitory basis conflicts with the notion, promoted by the company, that Uber, and gig work more generally, are a major feature of how people will earn a living in the future…