This is the Cato Daily Podcast for Tuesday, April 2nd, 2024.

I'm Caleb Brown.

In the forthcoming Cato Book The War on Prices, economist Brian Cutt singer sticks up for unions in a sense that is to say the

notion of the wage price spiral driven in part by union power is hard to

square with reality we spoke last month in Dallas.

What is the conventional view of the wage price spiral?

And first of all, why does that have such currency?

So the conventional view is going to be that labor unions or some

other institution with market power in the labor market is able to negotiate for higher

wages or wages above the competitive level.

And what's gonna end up happening then

is firms are gonna pass along part of their higher labor cost

to consumers in the form of higher output prices.

Of course, then the labor unions are going to want to negotiate for a higher

wage because the additional purchasing power they just got from the higher

wage has now been eroded by the fact that the prices of the goods and services they

consumer now hire. So they go back to the employers again.

They negotiate for a higher wage.

This pushes output price is higher.

Then they go back and again, that's where the moniker comes from

of the wage price spiral is wages go up then prices go up then wages go up and

allegedly is going to spiral out of control and I think the reason that it gets

...