Economists on strike?

This is a guest post by Chris Brown, who is a lecturer at the Australian Graduate School of Entrepreneurship at Swinburne University. It was originally published at mises.org and Chris blogs at Austro-libertarian.

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A recent teachers’ union strike that included economists and other business faculty members at my university — ironically and yet unsurprisingly led by an economics lecturer — has motivated me to consider the intended consequences of these strike actions.

Economists are prone to call the consequences of many decisions “unintended,” and thus assume the actors are genuinely ignorant of these effects or would otherwise not choose the actions that cause them. However, I must give these economists qua economists credit for a minimum knowledge of the effects of unions and strikes, and assume they knew the likely outcomes of their actions. If they did not understand these consequences, they surely cannot be worthy of what some consider a noble title: economist.

In the union’s political self-interest, these economists are making nearly everyone else worse off by going on strike. They went on strike to request, inter alia, higher wages and more paid leave.

Cui bono? It is obvious these union members would directly benefit if their demands were met. So, who would not benefit, and how? Let’s have a look at what these economists must have intended. The money has to be taken from somewhere.

The unionized economists must have understood that their actions could cause the administration to raise tuition prices in order to fund the union’s requested increase in pay. Yet not all students pay equally in Australia. International students make up a lot of the revenue and pay much higher fees. Hence, the union is essentially asking foreign students to give them more money — more money so these union members can go on vacation.

Or perhaps union members intended their increased salaries to come as a result of other employees losing their jobs. Even if nonunionized lecturers benefit in some ways from the union’s actions, other university staff members will most likely not. Maybe they will be fired, falling prey to the common consequence of unions: unemployment. Maybe some individuals who would have been hired will simply no longer be considered, since the funds that would pay their wages will be going into union pockets. Thus, union members were in a way just telling university management to not expand and grow.

Admittedly, the union members could have been asking merely for others’ benefits to be reduced or eliminated: other staff members could have fewer benefits so the union could have more. Either way, with more paid leave, the marginal productivity of all union workers would be lowered, thus consumers — the students — would be worse off. (Although a case could probably be made for paying union members to do nothing, rather than teach young minds.)

“The common consequence of unions: unemployment.”

Thus, overall, these unionized economists intended for some combination of increased tuition fees, lower employee benefits for some staff, and more unemployment. Perhaps Murray Rothbard would be shocked (although I doubt it) that presumably well-informed economists would make such decisions, given what he wrote in Man, Economy, and State:

It is certain that knowledge of these various consequences of union activity would greatly weaken the voluntary adherence of many workers and others to the mystique of unionism. (p. 714)

The degree to which these union members qualify as economists is the degree to which they must knowingly intend the consequences of their actions and therefore be culpable for them. The phrase “unintended consequences” all too easily attributes ignorance to the actions of union members. In large part, for many, including these unionized economists, the consequences must be intended.

11 thoughts on “Economists on strike?

  1. I dont think that it should be all that suprising that some economists are either colossally ignorant, or motived by self-interest.

    After all, Marxism, the opiate of the inteligentsia, is a valid economic school.

    More broadly, most people act in their own self-interest, and are by no means above using violence and government to achieve those ends. Why should economists be any different?

  2. Hence, the union is essentially asking foreign students to give them more money — more money so these union members can go on vacation.

    I wouldn’t deny economists the right to seek higher wages. When workers put up their price the customer, or the bosses customers, pays more. No big surprise really. Obviously a strike is a rather extreme negotiating tactic and perhaps less honourable than simply resigning. It is hard however to say what the unintended consequences of not striking might have been. Also has the university considered sacking them all for breach of contract or would this also entail unintended consequences?

  3. I have no problems with unions as long as employers have the right to throw them out of a job and the laws aren’t stacked up against the boss.

  4. It economists don’t put up their price one long term consequence may be less economists. Just pondering.

  5. Knowing the consequences and caring about them are not the same. I suspect the economists probably didn’t give a rats about the consequences of their strike, beyond its immediate aim.

    No reason why they should either – everyone pursues their own self interest. That’s what makes markets so efficient. The administration will respond to the union’s demands based its own interests. If it concedes, other people will respond according to their own self interest, including foreign students, non-union workers, etc.

    Subject to JC’s comment (which I endorse), there is only a problem if the government responds by increasing funding for universities. A market cannot operate if the government bails out one of the participants.

  6. I do think that Australian academics are underpaid – hence the continual struggle to get a fully staffed law faculty anywhere. Most business school professors could earn up to double their salary in the private sector.

    However, when universities cannot charge what they like, they will always struggle to earn enough revenue, and be reliant on grants to top up income from fees and deferred fees.

  7. Mark – its not just law schools, its just about anything.

    I just got an entry-level job in my field, which pay $7 more per hour more than a starting academic where I studied. If you include the volume of unpaid overtime most academics undertake, its probably more like $10-12 an hour more.

  8. Well there’s a quality argument. If we all worked for free, everyone else would else be better off, even in what is basically a government monospony. I’m sure Mao would be pleased by that one. Perhaps if they paid more, they might get better staff than now.

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