Unions, The Principal-Agent Problem, and Luddism

In response to Karen De Coster's objection to unions on the grounds that organized labor tends towards Luddism, Charles Johnson rightly points out that this problem is merely a function of the larger principal-agent problem. If I just get paid an hourly wage while my employer owns the firm and reaps all the profits, I will tend to actively oppose any technological or efficiency improvements that increase productivity on the grounds that doing so will reduce the labor hours needed and thus the amount I'll get paid.

Charles argues that this needn't be so; the principal-agent relationship need not be set up this way. Alternative arrangements, such as where labor collectively owns the means of production, through a co-op, for example, are also possible and in many ways more desirable.

However, it's not so clear to me the principal-agent problem is as easy to solve as Charles suggests it is. And it becomes even more difficult the lower down you get on the food chain, where labor is less-skilled, less-educated, and lower paid, and where labor may therefore be more averse to risk than otherwise. After all, one of the myriad justifications for profits going to the capitalist is that the capitalist takes on the most risks, using her own money as an entrepreneur to start an uncertain business, with a high failure rate, and also extending in time when she will get recompensated, assuming the business becomes successful. Whereas a poor laborer just scratching by may not have the wherewithal to take such a large risk, nor be willing or able to withhold present consumption for the chance at a bigger future payoff - the poor laborer just wants a certain payoff now, in the form of wages.

Now, one can certainly imagine a group of people getting together, pooling their resources, and collectively engaging in entrepreneurship, with the plan that they will all work together as laborers in the firm, share the profits, and also share the risk of loss. Instead of starting a new firm, existing workers within a firm might even pool their resources and collectively buyout the assets of the firm from the existing capitalist owners. Or, organized labor could just demand some compensation in the form of stock options or other claims on portions of future profit. And we already see some of these models in existence.

But becoming an investor and a risk-taker generally presupposes some level of acquired wealth, where you have taken care of basic needs and have some money left over to risk and save. Poor laborers aren't generally going to have access to that sort of capital, and they are the ones who seem to benefit from organizing their labor the most.

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The union makes us strong

Micha,

Thanks for your thoughtful comments.

I agree with you that worker ownership of the means of production wouldn't instantly solve all the problems of labor, and that -- for all I've said in the King Ludd post -- there might be other reasons why it turns out not to be viable, or at least not universally practicable. My main point was just to show that one alleged problem with unionism, presented by De Coster and others as if it were intrinsic to unionism as such, was actually only a problem with the particular model of union organizing that both anti-union business types and the establishmentarian union bosses fetishize, and which the Wagner/Taft-Hartley system actively subsidizes and protects in the name of "industrial peace," at the expense of competing organizing models -- like, for example, the worker-ownership model of the IWW. Those other organizing models may have problems of their own, but they don't have the problems that De Coster treats as intrinsic to unionism.

After all, one of the myriad justifications for profits going to the capitalist is that the capitalist takes on the most risks, using her own money as an entrepreneur to start an uncertain business, with a high failure rate, and also extending in time when she will get recompensated, assuming the business becomes successful. Whereas a poor laborer just scratching by may not have the wherewithal to take such a large risk, nor be willing or able to withhold present consumption for the chance at a bigger future payoff - the poor laborer just wants a certain payoff now, in the form of wages.

Well, O.K., sure, but two things.

First, insofar as this argument works, it seems like it's an argument for capitalists to take a role and get a cut in the high-risk start-up period for a firm; not necessarily much of an argument for capitalists remaining as residual profit recipients after the firm is already well established. It's perfectly possible to have both an infusion of working capital during the start-up period and a worker co-op at the end (either because the capitalist agrees to those terms, going in, or because the workers organize after a while and use their stronger bargaining position to convince her to disentangle herself and find a new entrepreneurial opportunity). The question is why that sort of thing doesn't happen now. Maybe it's because there's some other reason why it's not viable, but I'd suggest that a lot of the reason has to do with the way in which prevalent business models and prevalent union organizing models are supported and rigidified by government economic regimentation (as well as the establishmentarian business and union culture that that regimentation promotes).

Second, it's true that, especially for very low-paid wage workers, a lot of their economic decisions are going to be made as a reaction to the extremely precarious economic situation that they are in. This will naturally tend to make people more risk-averse and more interested in certain and quick pay-offs than they might otherwise be. But the precarity isn't a fixed natural fact; it's largely the product of specific government policies which ratchet up fixed costs of living while ratcheting down opportunities for homesteading and labor, with workers' livelihoods caught in the squeeze. Eliminate those policies and you'll begin to see workers with more of their costs of living safely covered and with more in the way of back-up options should their current arrangement fail.

But becoming an investor and a risk-taker generally presupposes some level of acquired wealth, where you have taken care of basic needs and have some money left over to risk and save. Poor laborers aren't generally going to have access to that sort of capital, and they are the ones who seem to benefit from organizing their labor the most.

Well, organizing your labor and providing a cushion of wealth to fall back on aren't mutually exclusive options. Unions themselves can (and, in the past, often did) provide an institutional vehicle for helping cushion workers from economic falls -- by improving wages, but, more importantly by providing institutions that help workers on the bum to find new work (e.g. union hiring halls, now illegal under Taft-Hartley) or for workers to help each other provide for themselves and their families during lean times (e.g. mutual aid societies, now partly illegal, or heavily regulated -- if they do anything that might be construed by the government as selling insurance -- and in any case crowded out by government welfare).

If it turns out that one aspect of radical labor solidarity (worker ownership of the means of production) works out best when accompanied by another aspect of radical labor solidarity (a vibrant network of mutual aid), well, I'm happy enough with that conclusion.

The reason workers don't buy

The reason workers don't buy up the means of production is, I suspect, high time preference. Most people, given an income greater than that necessary to meet basic living expenses, will use the surplus to improve their present standard of living rather than saving it in hopes of improving their future standard of living. Exceptions to this rule become capitalists.

Wage set by the market

If I just get paid an hourly wage while my employer owns the firm and reaps all the profits, I will tend to actively oppose any technological or efficiency improvements that increase productivity on the grounds that doing so will reduce the labor hours needed and thus the amount I'll get paid.

I don't think your wage will go either down or up as a result merely of the actions of your particular employer, because the wage is set by the market. Instead, you'll get fired and be forced to shift to a new part of the economy. Your wage at your new job isn't necessarily going to be either higher or lower. So the key concern, I think, is displacement. (Of course, if the market as a whole changes, then your wage will change, but that is nothing that either your employer or your union acting alone can either cause or prevent - the market is much, much too large.)

But displacement is going to happen no matter who owns the machines. Displacement is necessary in order to optimally reassign the human effort given the new tools that have become available. If labor buys the machines, displacement will still happen, and if we assume that labor is not standing in the way of progress, then displacement will happen to just the same degree.

If we turn our attention to changes in the market as a whole, then the widespread adoption of labor-saving devices actually increases the compensation of the typical worker. What happens is that people work pretty much the same amount, but because of labor saving devices, they are much more productive. The amount of labor per unit produced goes down, but more stuff - more wealth - is produced. And this does not all go to benefit the capitalists, because market competition forces capitalists to bid up wages.

Constant, Yes, you're

Constant,

Yes, you're correct. I didn't mean to imply that the wage rate per hour would necessarily decrease, only that the number of hours employed would decrease.

But displacement is going to happen no matter who owns the machines.

Right, but if labor owns the machines, that any loss they experience as laborers as a result of fewer hours employed they make up for as owners in greater returns on investment.

A crude form of compensation

Right, but if labor owns the machines, that any loss they experience as laborers as a result of fewer hours employed they make up for as owners in greater returns on investment.

"Any" loss? Your statement implies a clean equation, but that's not what's happening. The capitalists are by no means necessarily going to increase their profits by the exact amount of the decrease in labor, since switching out the old machines and bringing in the new machines isn't free. The new machines could well be more expensive than the old machines. There's no particular reason to believe that the result will be equality.

In the meantime, of course, the market is changing. The capitalists may not really be profiting at all but merely preventing themselves from going bankrupt. As technology advances, the productivity of laborers goes up. A capitalists who keeps using the same old machines and the same old processes will find himself competing against new competitors making better stuff cheaper. On the other side, measured in purchasing power, wages are going up, and if he doesn't want to lose his labor force he'll need to keep paying them enough to buy the same stuff that they could buy with wages they earn elsewhere in the market. So measured in purchasing power his labor costs are going up.

As a rule, capitalists are always operating at the very edge of profitability. Competition ensures this for all but a few brilliant or lucky capitalists. As new devices are introduced, the profits of a company aren't going to go up. On average, they're going to stay the same, and the way they're going to stay the same is by e.g., buying labor-saving equipment in order that they remain competitive.

So these capitalist-laborers that you and/or Rad Geek envisions are in all likelihood not as a rule going to be able to take longer and longer vacations. They'll still have to find new work, because their capitalist profits will not, on average, make up for the lost wage, or even one bit of it.

There is still, of course, the usual time value return on investment, the same return that can be made lending out money.

Yes, Constant, any

Yes, Constant, any loss.

Think about it this way: the co-op will only collectively agree to implement a change if the change meets the approval of either the majority or a unanimity of worker-owners, depending on the voting procedure chosen. Unless the change is either a pareto improvement or a kaldor-hicks improvement (again, depending on the internal rules of the co-op), there is no risk that the change will result in a loss in wages greater than the benefit in return on investment.

And your right - I never meant to imply that these two quantities would be equal: the benefits would have to be marginally greater than the costs or the change won't be taken.

Of course, this analysis ignores the external world, and the fact that even if this firm decides not to adopt the change, other firms might. Knowledge of this risk will in turn influence the co-op's willingness to adopt the change, if only to stay competitive.

Displacement is likely optimal

Micha,

We may be talking past each other. I think the optimum is likely to involve displacement of some workers. That being the case, then the compensation for the job loss isn't increased profits by itself, but increased profits plus a job somewhere else.

Sorry for the brief response, but I gotta go.

True, but even in the case

True, but even in the case of displacement where there simply aren't any other openings in the firm to which the displaced can be transferred, there are always compensatory tools like golden parachutes.

To a considerable extent,

To a considerable extent, Micha's argument about low-skilled labor, Brandon Berg's argument from time preference, and Constant's appeal to technological necessity overlap and share a common set of assumptions about the status quo.

Neither the current distribution of low- and high-skilled labor in the labor market, nor the choice of production technology, reflects any objective technical necessity. Rather, they are both choices from a wide range of possible mixes of production inputs and alternative forms of production technology, based on the interests of those who (for historical reasons) happen to be in a position to make the decision. The choice of capital-intensive production methods that substitute capital for labor, and deskill most labor and shift control over production upward in a hierarchy, are both management responses to agency problems given a particular historical pattern of capital ownership.

Worker's higher existing time preference, likewise, is a result of the same historical pattern of capital ownership. When capital "just happens" to be concentrated in a few hands, and the majority "just happen" to be reduced to propertyless wage laborers dependent on a labor-fund (cough Enclosures cough), time preference becomes as steep as hell. In a society where most property was distributed widely among small owners, the primary means of investment and raising the labor-fund would likely be federal organizations for cooperatively mobilizing capital and pooling risk.

Given the structural presuppositions of concentrated, absentee ownership, and the hierarchical organization of enterprise that this requires, management resorts to capital substitution and deskilling as a rational response to the agency problems that result from hierarchy and the divorce of ownership from labor. Given a different distribution of property (i.e., a free market society of copyholders and town artisans, in which most investment capital was cooperatively mobilized by these small owners), the worker-owners might find an entirely different choice of capital-labor mixture ideal. The owner of one factor of production seeks to minimize the agency problems of controlling the factors he doesn't own, and to maximize returns on the factor he does own. That can result in an entirely different choice of production technology being optimal, depending on who is the residual claimant.

But IMO labor is always the factor with the highest agency costs, because of the problems of incomplete contract, and the one way to minimize these agency costs is to vest residual claimancy in labor. That this obvious solution is ruled out, in favor of the Rube Goldberg device of managerial hierarchy to elicit effort from those with no direct interest in working harder, results from the historically conditioned starting assumptions of a system founded, not on the free market, but on robbery.

Forget the Jargon, Get out Your Funny Hat

If you think that modern industrial capitalism arose in England as I do, you will note that the originators were not from the landed aristocracy in which wealth and power were measured in land holdings and Royal titles, but by Protestant Whigs, new money men and financiers who bankrolled the developments derived from science and subsequent ingenious inventions such as the steam engine into large scale sustained developmental capitalism. Workers were not surfs but they were attracted to urban areas by the availability of jobs which they saw as better than plowing the soil. This is not to deny that there were human costs, or that labor unions later help ameliorate this. When labor and central planning got powerful stagnation set in.

Large scale capitalism and technology were copied and improved upon by others such as France, Germany and especially the United States. At this time, around mid Nineteenth Century industrialization slowed down in England, due to competition and the social cost.
In the US rapid development continued unfettered until the Great Depression. You act like the whole thing could have been pulled of by workers cooperatives lead by fist shaking populist collectivists.

You don’t take into account that these industrial achievements were willed by individuals. This was done by trial and error. Many individual enterprises failed. It is nice to look back and retrospectively think it could have been done more humanely and democratically by workers all agreeing in advance where to go next. Folks like you don’t realize that this is worse than planning by central authority, as it is ineffective and has to be supplemented by coercion. The history of the Soviet Union is instructive. The central planners didn’t really follow the wishes of the masses, only said they were. Now we know that central planning doesn’t work for long anyway, even if saints were the planners.

Workers communes like you favor are just a dream. Historically they become like guilds, operating as coercive political powers, often fascist and always seeking protection against competition. Like all powerful groups they become basically conservative and eventually crush innovation though they at first sell themselves as innovative. Thus they can only succeed in a static world. Since the world is not static, all institutions become outmoded. Only in capitalism are the decrepit organizations replaced peaceably. Of course they seek government protection, so capitalist systems can become corrupted too.

If syndicates were so great, they would have arisen and succeed spontaneously. You have to explain why not. Maybe it is all a conspiracy by the government, the residuum of aristocratic hierarchy and a sellout by non-communist labor unions. Get out your beanie hats with those little propellers on top.

Dave

Yugolavia is Instructive

Worker's higher existing time preference, likewise, is a result of the same historical pattern of capital ownership.

Nay.

Check out Yugoslavia, since we have the example. But even without it, it is quite clear that this is not the case. People need to feed their kids, and they don't know that they will want to stay at the same job forever - with free mobility of labor, and given the lesser investment that each individual worker will have in the future of the given firm, compared to a true owner (a capitalist), workers will always have a different time preference.

And this was seen in Yugoslavia: the workers prevented new hires and when other workers retired, tried not to replace them; and they invested very very little in long term expansion, capital improvements etc. They maximized their take-home pay.

Then they just oppose new labor

Alternative arrangements, such as where labor collectively owns the means of production, through a co-op, for example, are also possible and in many ways more desirable.

Then capital is OK, so long as the benefits are realizable on a short time horizon, but new labor and long-term investment become the enemy. See, for example, Yugoslavia. (Wages are essentially profit divided by number of workers).

This doesn't improve labor efficiency, but it does prevent long term expansion, innovation and economies of scale.

How about...

...giving labor shares of stock that they can do what they wish with? IIRC, GM and Ford were beginning to do this. It has the advantage of giving workers a long term stake in the company though it probably comes with its own disadvantages.

The best solution would be to change both the law and ideology so that it's legal and acceptable for companies to prevent unionization, hire scabs, etc. This probably won't eliminate unions completely due to game theoretic considerations, but it will certainly reduce their prevalence. This is all easier said than done, of course.

sure, but that is capitalism

If a worker-cooperative is just a company that gives worker stock; you just have capitalism. The cooperative ownership syndicalist socialism is meant to be full ownership by the workers. Thats where all the problems come in.

If firms just offer workers stock, its no different than what we have now. Even Wal*Mart offers workers stock.

*gasp* You mean the market

*gasp* You mean the market found a partial solution to the principle agent problem? I don't believe it...

I wonder how many companies actually do this though. It seems like a fairly new idea if GM and Ford are only now considering it. Perhaps this is why Wal Mart is one of the best run companies in existence.

Employee stock ownership

Rationally, there's no reason why employee stock ownership should solve the principal-agent problem, except for employees who have a lot of influence over the company's direction (i.e., CEO and a few others at the very top). If a company has 10,000 employees, the impact of a single employee on the stock price will almost always be negligible.

Insofar as employee stock ownership motivates workers, it's purely for irrational reasons. Another thing employee stock ownership or option programs can do, through a delayed vesting schedule, is give high performers an incentive to stay at the company longer, and also allow an employer to give an employee a bonus that can be revoked (by firing before it vests) if he fails to live up to future expectations.

There probably isn't a

There probably isn't a complete solution to the principal agent problem outside of eliminating the agent, which isn't likely to be optimal for a variety of reasons. At the margin, employee stock ownership would probably have some effect, however small it is. If employees are rational and their only relevant preferences are monetary, then you are right about the size of the effect.

There's a third category of motivators which we both initially missed: nonmonetary preferences which are rationally acted upon. I have no idea how large this effect would be in practice. We could even split the irrational category into two distinct categories according to weather the preferences be acted upon (or perhaps mis-acted upon) are monetary or nonmonetary.

Unions Obsolete and Anti-competitive ?

I am talking to this new CEO and the new theory management tries is to inculcate an “ownership” mentality by making employees “stakeholders.” This is largely non-monetary as some things are, believe it or not. Does anyone know about this? Just buzzwords or what?

Unions have no interest at all in this. They would rather inculcate loyalty to the union. There appear to be two typed of unions.

1.) The typical American union’s position is that the employer owes the employee good wages,benefits,safety and so on.

2.) The radicals ones want the unions to provide good wages and benefits, control of the workplace, justice for workers, removal of power from the bosses and the assumption of power by the workers.
For example here is a quote from: American Syndicalism: The I. W. W. Book by John Graham Brooks; The Macmillan Company, 1913.---

“ AMONG some of the expositors of I. W. W. principles, there (is) very little pretence that violence may not be necessary at certain stages and under certain conditions. ---. The ordinary strike best illustrates "direct action." 1 It begins locally in a mine or mill. It then reaches a higher form in "mass action" (the mass strike), which includes the industry. If those working over a whole industrial area go out together, we have the general strike. The "universal strike" arrives when so many workers go out in any country as to disable the main sources of production. At any point along the route, the "irritation strike," quick and mysterious in action, is a sort of gymnastic exercise to train and educate our coming masters. These irritants meantime are admirably calculated to unnerve the employer and prepare him the sooner for his exit.”

Yikes! No wonder the odious captains of industry opposed the radicals. I was always taught they did so because they were greedy. They also had to run a business. Obviously the radicals didn’t know how to do that.

The problem is you can’t have all Chiefs and no Indians. All groups need leadership which involves power. Any organization, wheather a football team, a military organization or a company needs leadership which involves power. The goals of the organization must be put first, not benefits to the individual. Unionization is not in line with this principle. Hence, other things being equal, the company that competes with a highly unionized company will win unless the unionized company has special powers and tactics other than the power to peacefully compete. Leftist libertarians loose me arguing for unions, especially the radical type of union.

Labor unions seem obsolete. Athletic teams and military groups are highly dependent on hierarchy, cohesion discipline and morale. Unions are entirely inimical to these things. The new managers are trying to attract good people using different techniques. Of course if people find out it is phony, it won’t work.

Dave

Unions have no interest at

Unions have no interest at all in this. They would rather inculcate loyalty to the union. There appear to be two typed of unions.

But that's precisely Rad Geek's point, if you read his original post: that you are basing your definition of unions off of how they currently exist, but that doesn't exhaust the conceptual possibilities of how unions could exist. Unions that also own all or a significant part of the firm have an interest in promoting the interests of the firm, and not just the interests of the union.

“ AMONG some of the expositors of I. W. W. principles, there (is) very little pretence that violence may not be necessary at certain stages and under certain conditions. ---. The ordinary strike best illustrates "direct action." 1 It begins locally in a mine or mill. It then reaches a higher form in "mass action" (the mass strike), which includes the industry. If those working over a whole industrial area go out together, we have the general strike. The "universal strike" arrives when so many workers go out in any country as to disable the main sources of production. At any point along the route, the "irritation strike," quick and mysterious in action, is a sort of gymnastic exercise to train and educate our coming masters. These irritants meantime are admirably calculated to unnerve the employer and prepare him the sooner for his exit.”

Maybe it was mentioned in the ellipses, but I don't see any necessary violence here. Or anything very much surprising at all. Unions withhold their labor; that's their bargaining chip.

Yikes! No wonder the odious captains of industry opposed the radicals. I was always taught they did so because they were greedy. They also had to run a business. Obviously the radicals didn’t know how to do that.

Obviously? How does any of that obviously follow?

The problem is you can’t have all Chiefs and no Indians.

Sure you can. Ever heard of self-employment? The smaller the organization, the easier it is to solve the principal-agent problem. Maybe it is true that an organization cannot become significantly large without first becoming hierarchical. But as Kevin Carson often points out, being significantly large is not necessarily efficient absent government subsidy.

The goals of the organization must be put first, not benefits to the individual.

Huh? Why in the world would we want to promote the goals of a non-person entity over the interests of actual people? What's the point of having an organization of people if not to benefit the people who make up the organization?

Trust the Market

“At any point along the route, the ‘irritation strike,’ quick and mysterious in action, is a sort of gymnastic exercise to train and educate our coming masters. These irritants meantime are admirably calculated to unnerve the employer and prepare him the sooner for his exit.”

Don’t you get it? Let me translate. We want to take away the company that you and the investors developed and made successful by getting your employees to purposely F things up. We are encouraging your employees to do so by telling them that as workers they are entitled to be the rightful owners. When we succeed in taking over the workers syndicate will be your masters.

You are saying that people who think like this might be able to run a business? Well maybe a Mafia style business. Maybe that is another reason that a synonym for a criminal organization is “The Syndicate.” I am saying that a better style might be to delegate authority to people who want the business to succeed, not the ones who want to F it up. The F- ups you fire. The IWW could have invented models that competed with the established businesses and could have tried to peacefully competed. Instead they promoted industrial sabotage which is not peaceful.

Sure you can. Ever heard of self-employment? . But as Kevin Carson often points out, being significantly large is not necessarily efficient absent government subsidy.

Self and small scale employment are fine things and exists to a great extent. To be successful in the global sense you also need big employers to link the local economy to the national or world economy. Without this towns wither. I have seen little towns bloom like desert flowers just because they were on a major interstate highway on a major commercial rout near some big city and a big company puts in a distribution center. If the IWW were big there, they would move down the road a few miles. Even the dreaded Federal Government can be a big employer. I wonder how many people are employed in Ogden Utah where I have to send my quarterly protection money to the US Government or how many federal prison guards are employed to guard those who omit doing so?

“Huh? Why in the world would we want to promote the goals of a non-person entity over the interests of actual people? What's the point of having an organization of people if not to benefit the people who make up the organization?”

Customers come to you not to help you but to help themselves so in this sense every business entity violates your goal of putting people first. The business entity puts the customer ahead of the employee in order to compete. If you buy a car and the transmission falls out do you accept the excuse that Joe wasn’t feeling well the day he put in your transmission? No, you buy a different car next time. Then Joe doesn’t have a job.
No doubt bosses acted stupidly and got what they deserved when the employees underperformed and they produced crappy products. Then the jobs went overseas and the company can’t afford their health care plans. This is all just the spontaneous reactions of markets which take time to work out. Labor must play by the dictates of the market, not some preordained ideal. The libertarian ideal to me is trust the market.
Dave

You are saying that people

You are saying that people who think like this might be able to run a business?

It doesn't seem like relevant evidence either way.

Instead they promoted industrial sabotage which is not peaceful.

But it isn't necessarily violent either. Strategically withholding work is a form of sabotage.

Customers come to you not to help you but to help themselves so in this sense every business entity violates your goal of putting people first.

No, it's putting the owners first. Which is different than putting the organization as opposed to its individual members first.

The libertarian ideal to me is trust the market.

And as Rad Geek was pointing out in his original post, what we currently have is far from a free market.

Not force, but fraud?

But it isn't necessarily violent either. Strategically withholding work is a form of sabotage.

The employee might avoid initiating force, but aren't you committing fraud if you accept payment from an employer to provide her a service, and then actively work instead to lower the value of her property to the extent she abandons it?

If you want to temporarily or permanently withhold work, you could do so, but then you shouldn't expect remuneration from your employer and shouldn't use force or defamation to prevent others from providing the work in your stead.

Not necessarily. For

Not necessarily. For example, "Work to rule" is a way of following the rules explicitly, thereby sabotaging production.

'If managers' orders were completely obeyed,confusion would result and production and morale would be lowered. In order to achieve the coals of the organisation workers must often violate orders, resort to their own techniques of doing things, and disregard lines of authority. Without this kind of systematic sabotage much work could not be done. This unsolicited sabotage in the form of disobedience and subterfuge is especially necessary to enable large bureaucraicies to function effectively.'
(Social Psychology of Industry by J.A.C.Brown)

Every industry is covered by a mass of rules, regulations and agreed corking practices, many of them archaic. If applied strictly they would make production difficult if not impossible. It is often forgotten that many of these rules were introduced to safegaurd management liability in the event of industrial accidents. Managements are quite prepared to close their eyes when these rules are broken in the interests of keeping production going. In many situations the selective application of rules can be a very potent weapon in the workers hands. Even the modest overtime ban can be effective, if used critically. This is particularly so in industries which have an uneven work pattern.

This is neither force nor fraud.

If you want to temporarily or permanently withhold work, you could do so, but then you shouldn't expect remuneration from your employer and shouldn't use force or defamation to prevent others from providing the work in your stead.

Why shouldn't you use defamation? Isn't calling a scab a scab free speech?

Calling a scab a scab undermines the entire 'unionist' argument

"Why shouldn't you use defamation? Isn't calling a scab a scab free speech?"

They have every right to do so, but calling a scab a scab is clear evidence that the whole "brotherhood of workers" stuff is nonsense. Then the argument that it's and eternal struggle of bosses vs workers no longer holds true, and the reality of the situation that the dynamics are better described as bosses vs other bosses vs workers vs other workers, any party of which will do their best to undermine the success of any other party including their less fortunate "brothers".

but calling a scab a scab is

but calling a scab a scab is clear evidence that the whole "brotherhood of workers" stuff is nonsense

Okay. I'm not committed to a "brotherhood of workers." But even if I was, I could argue that by crossing the picket line for purely selfish reasons instead of colluding with the rest of the strikers, the scab is abandoning the "brotherhood of workers" and ultimately harming his or her own future prospects. Acknowledging all this isn't at odds with arguing that workers would be better off if they worked together.

Monopolies exclude competition

Workers compete, and one group of workers can raise its wages if it can find a way to limit competition from everyone outside the group by raising barriers to entry. This does not typically help the outsiders, but rather can be expected to harm the outsiders. An example of a barrier to entry is a picket line. Another example of a barrier to entry is the open anger and contempt shown by union members to scabs, which infuses the very word "scab". Yet another example of a barrier to entry is racial apartheid. The effect is the same: to increase the bargaining power of the in-group by restricting competition from outsiders.

Technically, a black South African who restrains himself from seeking employment in a certain factory so that its white employees can enjoy a higher wage could be expressing his solidarity with his lighter-skinned brothers. He may love them that much. However, the introduction of apartheid to, ahem, strengthen his resolve to show solidarity would not typically be interpreted as a boon to him or to the people he supports with his income. And the same can be usually said of informal, non-state measures used to, ahem, strengthen so-called solidarity. Such as the use of the term "scab".

Workers compete, and one

Workers compete, and one group of workers can raise its wages if it can find a way to limit competition from everyone outside the group by raising barriers to entry.

Sure, creating barriers to entry for other workers is one way to raise one group of workers' wages. Another is to increase their bargaining power relative to employers and take a bigger slice of the producer's surplus, i.e. economic profits.

And it's not technically a monopoly; it's closer to an oligopoly. But notice that in a case of perfect competition (at least as defined by neoclassical models) at equilibrium, there are no economic profits. In cases where there are profits, and thus cases that are not considered perfect competition, there isn't any libertarian reason to favor the profits going solely to the capitalist and not to the workers. And it's not as if the oligopoly enjoyed by the labor union is any worse than whatever market power the firm is using to make profits.

Violence against scabs is not market power

Sure, creating barriers to entry for other workers is one way to raise one group of workers' wages. Another is to increase their bargaining power relative to employers and take a bigger slice of the producer's surplus, i.e. economic profits.

The latter includes the former: one method to increase the bargaining power of a group of workers is to exclude non-members of the group. The availability of alternatives reduces bargaining power; the blocking of those alternatives increases bargaining power.

And it's not technically a monopoly; it's closer to an oligopoly

A union of workers is not an oligopoly but a cartel. What labor unionists do is collude, and collusion is what forms a cartel. Oligopolists may or may not collude. If they collude, then they have formed a cartel.

In cases where there are profits, and thus cases that are not considered perfect competition, there isn't any libertarian reason to favor the profits going solely to the capitalist and not to the workers.

Libertarians are all about how it was accomplished. Whether the rules were broken. Libertarians are big on rules, on the rules not being broken. Labor unions have far from a clean record in this area.

And it's not as if the oligopoly enjoyed by the labor union is any worse than whatever market power the firm is using to make profits.

There are many perfectly legitimate ways to make enormous profits. For example, a firm that innovates can, temporarily, be the only firm around with a certain product on offer, allowing it to charge more than its own costs. And there are also many illegitimate ways to make profits. For example, a firm that lobbies the government can, by law, be the only firm around with a certain product on offer. Labor unions are not famous for innovating. They are famous for blocking, for taking over property, and for engaging in violence. Labor historians are in the habit of glorifying this history.

The latter includes the

The latter includes the former: one method to increase the bargaining power of a group of workers is to exclude non-members of the group.

Agreed. But it's not the only method.

A union of workers is not an oligopoly but a cartel.

And aren't all cartels oligopolies? The latter includes the former. :)

Libertarians are big on rules, on the rules not being broken. Labor unions have far from a clean record in this area.

By the same token, neither do capitalist owners.

There are many perfectly legitimate ways to make enormous profits.

And there are many perfectly legitimate ways to maintain a worker's cartel for the purposes of increasing bargaining power relative to employers

Oligopolies and cartels

And aren't all cartels oligopolies? The latter includes the former. :)

An oligopoly is a set of competitors sufficiently few (oligo-) in number so that each one, by unilateral action (without any coordination with others) can significantly affect the market. An oligopoly does not require coordination. A cartel is defined by coordination. An oligopoly, because it is few in number, can of course more or less easily coordinate and thus become a cartel. But a cartel can include a large number of competitors (e.g. a labor union), so its members need not form an oligopoly. Furthermore, the cartel itself is a single entity, so is more a monopoly than an oligopoly, which is distinct from the monopoly by being plural. At least, that's how I understand the terms.

By the same token, neither do capitalist owners.

A lot of the supposed misdeeds of capitalist owners are in fact legitimate acts of self-protection, but viewed through the lens of the labor unions.

But aside from that, the topic was scabs and their relationship to the union. You said you could argue that scabs were abandoning the brotherhood of workers and ultimately hurting themselves by being scabs. I pointed out that the rhetoric of so-called solidarity was a poor match to the reality that unions typically benefit at the expense of scabs, and scabs benefit at the expense of unions, which is, after all, why scabs are scabs and why unions hate and sometimes attack and attempt to murder scabs. The reality is that people really do act in their own best interest, and the best interest of some workers is not, in fact, typically the best interest of other workers.

Whether the capitalists are guilty of misdeeds is not especially relevant. The labor union misdeeds most pertinent to the topic are misdeeds committed against other workers, who first, of course, must be dehumanized by being called "scabs".

And there are many perfectly legitimate ways to maintain a worker's cartel for the purposes of increasing bargaining power relative to employers

And the sort of methods brought to mind by the term "scabs" are not among them.

Why shouldn't you use

Why shouldn't you use defamation? Isn't calling a scab a scab free speech?

Just to disentangle things here: I'm pretty sure that defamation has to be false. So calling a scab a scab is, by definition, not defamation.

Without even getting into free speech, which might protect false speech and might not, depending on other factors.

A scab is less than human

Speaking about someone as though he were less than human is a preparation for treating him as though he were less than human. The term "scab" gives off the scent of a threat.

Ok.

Ok.

Mental note...

Never offer Micha a job.

Though to be fair, I've never really understood this whole 'employment' thing and have generally avoided being on either side of an employment contract. I'm glad this thread introduced me to the formal concept of 'principal-agent problem' so I can now explain why.

Let's Not Be Hasty

Never offer Micha a job.

You never know what the labor market's going to look like. Ghertner, imperfect as he is, may end up being your best bet.

Reply to Micha

Ok I will concede point one. Once the union we are talking about took over the company they could run it any way they wanted including successfully. They could also have started a company of their own without taking over a company without compensating its owners.

Mark covered point two
Point three-

No, it's putting the owners first. Which is different than putting the organization as opposed to its individual members first.

I don’t think it of interest to the customer whose interest purchasing the product serves. The cash paid by the buyer will go to compensate both the worker and the owner as well as to meet expenses but will be paid to the organization.

Point four- A agree libertarian ideals are just that,ideals.

Dave