Labour Market Theory: A Constructive Reassessment

Labour Market Theory: A Constructive Reassessment

Labour Market Theory: A Constructive Reassessment

Labour Market Theory: A Constructive Reassessment

Synopsis

This volume provides a unique perspective on the economics of labor markets by demonstrating how radical political economy has been incorporated into mainstream economics.

Excerpt

This book is concerned primarily with the economics of labour markets. As such, it is devoted to theoretical considerations and the critical deployment of ideas about the workings of labour markets. The writing has taken place over a period of more than a decade, although much of the text is recently written and the whole text has been revised over the past year.

During this gestation period, however, labour market theory has changed substantially. The oldest part of the work is the critical assessment of segmented labour market theory. Ten years ago, it was dominated by radical political economy, and it was treated with contempt by orthodox economics; it was more comfortably accommodated within mainstream industrial sociology. However, as demonstrated in detail in Chapter 5, the theory was permanently open to question in terms of its content and validity. The literature was prospering if success were to be measured by quantity of output alone, for it did generate an extremely diverse set of empirical case studies. But its rich contribution in terms of empirical content has to be set against theoretical deficiencies and lack of firm analytical foundations.

As shown in Chapter 6, this situation has changed quite dramatically over the intervening period, if not through the resolution of the difficulties within the radical theory. Rather, it is mainstream neoclassical economics that has progressed, positively embracing a role for segmented labour markets. And, to a large extent, the more radical approach has set aside much of its traditional content and has compromised with, indeed has become subordinate to, the orthodoxy. This remarkable change has come about through the capacity of neoclassical economics, despite being based upon a particularly narrow form of methodological individualism, to develop a theory of market structures. Its apparent inability to do so previously had been the basis both for the support by others for critical alternatives as well as the orthodoxy’s hostility to them.

By providing an explanation of how the aggregated behaviour of optimising individuals might give rise to socioeconomic structures within equilibrium, neoclassical orthodoxy has realised three significant accomplishments, certainly from the perspective of just a decade or two before.

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