THE BROTHERHOOD of Locomotive Engineers is providing the Reagan administration with a small but useful lesson in the realities of labor economics. The engineers' strike is not really against management, but against other unions whose members have won supplemental pay in a deal to reduce the size of train crews. The engineers' position is a simple one. They have always been the best-paid men on the train, by a certain differential hallowed by tradition. With clenched teeth and white knuckles, they declare that they want their differential, and they are prepared to keep their industry -- and many others -- shut down until they are assured of it.
When Mr. Reagan came to office, he made it clear that he intended to keep his administration out of labor negotiations. The general thought was that the free market was to operate unimpeded, in labor as in everything else. Some of the administration's economists felt that unions would see the tight restraint of the money supply, expressed in the weekly figures for M-1, and perceive that the day of the inflationary wage increase was over. Other economists thought that unions probably would not moderate wage demands until unemployment began to rise. But then, surely, wages would hold to the noninflationary trend.
As things are working out, it seems that the locomotive engineers have not been following M-1 as carefully as they were supposed to. Certainly they have not taken its austere message to heart. That will be a deep disappointment to the economists of the rational-expectations school. There seems to have been a collision between rational expectations and the engineers' expectations.
Nor has the thought of unemployment deterred the strike. The country is now in the 15th month of a severe recession, and the unemployment rate is nearly 10 percent. In railroading, the number of jobs has been falling for a generation. But the engineers want their differential.
Sometimes, in a situation like this, a union's leadership understands perfectly well that a large raise is out of the question. But the members, not all of whom follow economic policy closely, do not necessarily understand it. They pursue their traditions, and traditions are slow to bend. That's why, throughout the national economy as a whole, wages are still rising at an average rate of about 7 percent a year.
That's why President Reagan was right to rise above principle, as the late Sen. Everett Dirksen used to say, and intervene in the engineers' strike. And that's why Congress, rather than the free market, is probably going to have to produce a settlement.