:) That's definitely a very Ronald Coasian answer! We should start that lobby to get Ronald Coase accepted into neoliberalism or novoliberalism or whatever com

:) That's definitely a very Ronald Coasian answer! We should start that lobby to get Ronald Coase accepted into neoliberalism or novoliberalism or whatever comes next. I purposely didn't give the answer because I think there are possibly other explanations besides transaction costs and regulation (probably the more friedman-esque go-to). The reason I like his papers a lot is because of his questions. He has a Darwinian sort of approach. Why does the moth have such a strange beak. Lets look for the matching orchid. I think (don't know, speculation) labour markets are special in other ways, not just high transaction costs. A company is a society. People have loyalties and identity tied into it. We are a social animal in very fundamental ways. Our psyche handles the intricate nuances of human cooperation by default. Things happen in a team of people that know each-other, like each other or just think of themselves as part of a group that I think are fundamental to this question. I don't think transaction costs sums it up. I suspect group-oriented work plays a bigger role. Also employer-specific skillsets, though that probably can be lumped into transaction costs. Incidentally, I feel that "basic economic theory" tends to acknowledge transaction costs mostly as a caveat to basic models: "assuming no/low transaction costs," more often that actually accounting for it. I think this is also true for "economist hat" thinking. Coase complained about this a lot. Coase theorem is (at least to me) taught as a theory about bargaining and contracts solving problems like externalities. For Coase, the caveat was the "theorem." In the absence of transactions costs blah blah pareto optimals. externalities... He thought it was obvious that the pareto efficiency doesn't actually happen in reality, externalities continue. Therefore transaction costs must be high. To me, this is the big difference between Friedman and Coase. Friedman's a pure theory guy. The main opposition to this view today is a theory-less econometrics/evidence based "wonkish" analysis. Coase is a middle ground. Theories make predictions. In some cases they are good. In cases where they're not, we need theoretical expansion. Neoliberals tend to reach for "distortion" as an explanation far too often, and selectively IMO. (we're really in the weeds here, sorry)