I was saddened to read today of the passing of the famed Swedish economist Assar Lindbeck last week. The American Institute for Economic Research has a good summary of Lindbeck's contributions. My ECONS102 students might recognise the Insider-Outsider model as one of the reasons for job rationing in the labour market:
His most substantive contribution to the body of economic knowledge is the Insider-Outsider model of labor markets that he developed together with Dennis Snower. In several much-cited publications in the 1980s, Lindbeck and Snower showed that those already employed (and those in labor unions) are uninterested in expanding jobs for those outside the labor market. The negotiation of wages between labor unions and firms – the “insiders” – thus set up barriers and exclude those about to enter the labor market or for some reason have been unable to get a job – the “outsiders.” Labor unions, in other words, are not nice, benevolent constructions looking out for the little guy, but just another privileged interest group advancing the welfare of its members at the expense of outsiders. The model offers an explanation for involuntary unemployment and, like efficiency wages, a rationalization for above-market clearing wages.
My ECONS101 and ECONS102 students might recognise his arguments against rent control, especially this:
...one of Lindbeck’s most iconic and memorable quotes are called for:
“Rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.”
I had no idea how instrumental Lindbeck was in the development of the Nobel Prize in Economics, although on reflection it makes a lot of sense. He obviously made many more contributions than I realised. In the AIER article, I particularly liked this bit:
Perhaps becoming publicly loved is out of reach for economists, but Lindbeck at least managed a wide enough respect and recognition that almost everyone knew his name.
That might be all that any economist could ask for. Lindbeck will be missed.
[HT: Marginal Revolution]
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