ABSTRACT
Richard Freeman and James Medoff appeal to both theory and empirical evidence. In this chapter, the author introduces the theory side of the subject. He reviews the theoretical literature on what Freeman and Medoff call the “monopoly face” of unions. The author focuses on the modern, microeconomics-based theory of unions. Naturally, this perspective emphasizes the economic function and effects of unions over the noneconomic, particularly since the issue of efficiency occupies center stage in modern economics. Freeman and Medoff claim that most economists view unions as akin to a labor market monopoly. In the public sector, unions use their political power to limit substitution possibilities in other ways, such as leading opposition to privatization of public services. In reality, however, unions often are only able to induce firms to provide more collective goods or honor workers rights when voice is backed up by muscle.
