Visitors Now:
Total Visits:
Total Stories:
Profile image
By Cafe Hayek (Reporter)
Contributor profile | More stories
Story Views

Now:
Last Hour:
Last 24 Hours:
Total:

Monopsony Power? Really?

Friday, November 4, 2016 11:57
% of readers think this story is Fact. Add your two cents.

(Before It's News)

(Don Boudreaux)

Tweet

Here’s a letter to the Wall Street Journal:

Jason Furman and Alan Krueger leap far too fast from the existence of non-compete clauses in labor contracts, and unavoidable “frictions” in searching for new jobs, to the conclusion that American labor markets are plagued by monopsony power (“Why Aren’t Americans Getting Raises? Blame the Monopsony,” Nov. 4).  It’s telling that the only specific example they offer of alleged monopsony is collusion by hospitals to depress the wages of registered nurses.

Few industries in the United States are more beset with entry barriers and occupational-licensing restrictions than is the healthcare industry – an industry saddled with prohibitions on nurses operating their own healthcare practices, as well as with government-erected obstacles to the opening of new healthcare facilities.  My colleagues Thomas Stratmann and Chris Koopman found, for example, that “[c]ertificate-of-need laws in 36 states and the District of Columbia restrict competition in healthcare facilities markets by requiring healthcare providers to obtain permission before adding or expanding any regulated facilities or services.”

Because these restrictions and impediments thwart competitive market forces that would otherwise prevent monopsony power from emerging, it’s unsurprising to find instances of such power in the healthcare industry.  And it is therefore illegitimate to use an instance of monopsony power in the healthcare industry as evidence that monopsony power runs rampant throughout the economy.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

This essay by Furman and Krueger is a parade of poor analysis and economic fallacies.  When I have more time, I hope to blog on other of these fallacies.

Report abuse

Comments

Your Comments
Question   Razz  Sad   Evil  Exclaim  Smile  Redface  Biggrin  Surprised  Eek   Confused   Cool  LOL   Mad   Twisted  Rolleyes   Wink  Idea  Arrow  Neutral  Cry   Mr. Green

Top Stories
Recent Stories

Register

Newsletter

Email this story
Email this story

If you really want to ban this commenter, please write down the reason:

If you really want to disable all recommended stories, click on OK button. After that, you will be redirect to your options page.