Bellante on Monopsony

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A great deal of folly is unleashed by failure to apply even the most useful theories wisely.  I likely will write more in coming days on what strikes me as a wholly naive and uncritical transference of a textbook model – that of short-run monopsony power in the market for unskilled workers – to reality.  This transference leads not only to faulty analysis but to enthusiastic apologies for a policy, minimum-wage legislation, that is a special tax on employers who hire unskilled workers.  Low-paid workers – those whose employment can least afford to bear the burden of a special tax – are victims of this naive blackboard theorizing.

In the meantime, here’s the labor economist Don Bellante writing clearly, in 2007, on the general misunderstanding and misuse of monopsony-labor-market models.

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