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Wow, this is wild. A great example of how regulation can be a double-edged sword. Anti-trust law prevents market participants from colluding to increase their i

by caylus 6y ago

Wow, this is wild. A great example of how regulation can be a double-edged sword. Anti-trust law prevents market participants from colluding to increase their influence - which is exactly what a labor union does. Lawmakers patched the issue by exempting labor unions, but they didn't cover independent contractors. The latest attempt to patch the issue is to force reclassification of many independent contractors into employees. What unforeseen effects might this have? Does AB 5 have enough special cases to avoid making things even worse?

andromeduck 6y ago
Why should we protect cartels?
- missedthecue 6y ago
  It's a good question. The very purpose of a union is to protect its members even at a cost to everyone else. The chicago plumbers union for instance fought successfully over and over to prevent the city from switching their aging lead water piping infrastructure to a composite type. The reason? Lead water piping required more billable hours of maintenance. The result was that Chicagoans had to pay more money to continue drinking from a poisoned water supply, and the plumbers got richer at their expense. In general, there is little evidence that cartels produce net benefits, whether they deal in oil or in labour or in anything else. I suppose the average person is sympathetic to unions both because they can see themselves as a plumber more easily than as an oil sheikh, and because the societal costs of labour unions are hidden and do not take shape in a very tangible form, be they high import tariffs, reduced R&D spending, bad water infrastructure, or more expensive and noncompetitive goods and services, among other things. Regardless, the economics of cartels will never be sound.
- wahern 6y ago
  If a union is a cartel because its members bargain collectively, so is a corporation. If you want to keep corporations because of the organizational efficiencies that maximize productivity and welfare, then why not unions? And let's not get into a semantic debate--the rules for forming corporations are designed to make it efficient for investors to organize; likewise the rules for forming unions are designed to make it efficient for laborers to organize. So if you argue that laborers should instead form a corporation if they want to organize, I'd rhetorically ask why not make investors use unions as their vehicle.
  - zdragnar 6y ago
    The rules for forming corporations with investment are not about efficiency at all, but to provide a structured way to shield passive investors from financial liability. The same is true for employees- if a company goes under due to excessive debts, the delivery driver won't be on the line for those debts.
    - wahern 6y ago
      Limited liability isn't for its own sake, it's intended to make the market for investment--the deployment of capital--more efficient. An employee doesn't actually enjoy limited liability, but he doesn't need it because employees aren't jointly liable except if they directly cause an injury. If a UPS driver runs over a kid, both the driver and UPS are jointly liable, but other drivers wouldn't be liable regardless of limited liability laws. The point of limited liability is to shield passive investor-owners from joint liability. Without limited liability there would never be such a thing as passive investor-owners (e.g. shareholders) because anybody with money to lose would want to have a regular and direct management role to ensure the company didn't do something stupid, like hire inattentive drivers, that would put all of their other assets at stake. All their other assets would be at stake because owners are normally vicariously, jointly liable through the doctrine of respondeat superior. "Limited liability" means liability is limited to the investment.[1] Similarly, the rules for forming legal business entities in general (whether with limited liability or not) are not for their own sake. The point is to provide a prepackaged set of legal rules that reduce the transactional costs in organizing and running cooperative business ventures. The transactional costs of making constant, 1:1 contracts would often prohibit otherwise socially beneficial economic activity, especially when you consider that business entity rules don't merely complement and substitute 1:1 contracts as between members but also complement and substitute for the contracts and other legal relationships those members make with third parties (e.g. customers). Abstractly, these are very much the same reasons why you might want to permit unions: collective bargaining overcomes the transactional costs of each employee negotiating 1:1 with the employer-owners. And those transaction costs disfavor employees precisely because the employer-owners already benefit from rules that make it cheaper to organize and manage the business. Now, maybe there's much more value in optimizing investor cooperation than labor cooperation, and so you could absolutely make an argument for why we should have specialized legal vehicles for investor-owners but not for laborer-employees. But that would have to be an empirical argument to justify the asymmetry, unless for some reason you simply believed wealthy people (those with enough money to be investors) were inherently more worthy than others. You can't simply accuse a union alone of being a cartel, because it's just the flip side of the capitalist/laborer coin. Note that the antitrust immunity enjoyed by unions is, at least theoretically, constrained to permitting individuals to "conspire" in the market for their labor. But that's no different than what investor-owners are doing in a corporation--"conspiring" in the market for capital in a way that increases the conspirators' profits as compared to if each conspirator had to be an active participant in each venture in which he wanted an ownership stake. [1] A negligent UPS driver's liability isn't limited to the economic benefit (e.g. wages) derived from the particular economic activity he was engaged in. His $50k inheritance is at risk, too. Limited liability is the exception, not the rule.
cratermoon 6y ago
The classification of certain jobs as independent contractors was driven by self-interested corporations in several industries, including media and tech. Remember the Microsoft perma-temp lawsuits? Reclassification is not a patch, it's fixing a kludge that was specifically engineered to allow businesses to avoid having to treat their employees as employees.
eplanit 6y ago
A question I have about AB-5: suppose an individual incorporates as an LLC or an S-Corp, where their business is providing driving services. Can Uber/Lyft adapt to engage with these people on a "Corp-to-Corp" basis, and therefore avoid AB-5?

by caylus 6y ago

andromeduck 6y ago

Why should we protect cartels?

missedthecue 6y ago
It's a good question. The very purpose of a union is to protect its members even at a cost to everyone else. The chicago plumbers union for instance fought successfully over and over to prevent the city from switching their aging lead water piping infrastructure to a composite type. The reason? Lead water piping required more billable hours of maintenance. The result was that Chicagoans had to pay more money to continue drinking from a poisoned water supply, and the plumbers got richer at their expense. In general, there is little evidence that cartels produce net benefits, whether they deal in oil or in labour or in anything else. I suppose the average person is sympathetic to unions both because they can see themselves as a plumber more easily than as an oil sheikh, and because the societal costs of labour unions are hidden and do not take shape in a very tangible form, be they high import tariffs, reduced R&D spending, bad water infrastructure, or more expensive and noncompetitive goods and services, among other things. Regardless, the economics of cartels will never be sound.
wahern 6y ago
If a union is a cartel because its members bargain collectively, so is a corporation. If you want to keep corporations because of the organizational efficiencies that maximize productivity and welfare, then why not unions? And let's not get into a semantic debate--the rules for forming corporations are designed to make it efficient for investors to organize; likewise the rules for forming unions are designed to make it efficient for laborers to organize. So if you argue that laborers should instead form a corporation if they want to organize, I'd rhetorically ask why not make investors use unions as their vehicle.
- zdragnar 6y ago
  The rules for forming corporations with investment are not about efficiency at all, but to provide a structured way to shield passive investors from financial liability. The same is true for employees- if a company goes under due to excessive debts, the delivery driver won't be on the line for those debts.
  - wahern 6y ago
    Limited liability isn't for its own sake, it's intended to make the market for investment--the deployment of capital--more efficient. An employee doesn't actually enjoy limited liability, but he doesn't need it because employees aren't jointly liable except if they directly cause an injury. If a UPS driver runs over a kid, both the driver and UPS are jointly liable, but other drivers wouldn't be liable regardless of limited liability laws. The point of limited liability is to shield passive investor-owners from joint liability. Without limited liability there would never be such a thing as passive investor-owners (e.g. shareholders) because anybody with money to lose would want to have a regular and direct management role to ensure the company didn't do something stupid, like hire inattentive drivers, that would put all of their other assets at stake. All their other assets would be at stake because owners are normally vicariously, jointly liable through the doctrine of respondeat superior. "Limited liability" means liability is limited to the investment.[1] Similarly, the rules for forming legal business entities in general (whether with limited liability or not) are not for their own sake. The point is to provide a prepackaged set of legal rules that reduce the transactional costs in organizing and running cooperative business ventures. The transactional costs of making constant, 1:1 contracts would often prohibit otherwise socially beneficial economic activity, especially when you consider that business entity rules don't merely complement and substitute 1:1 contracts as between members but also complement and substitute for the contracts and other legal relationships those members make with third parties (e.g. customers). Abstractly, these are very much the same reasons why you might want to permit unions: collective bargaining overcomes the transactional costs of each employee negotiating 1:1 with the employer-owners. And those transaction costs disfavor employees precisely because the employer-owners already benefit from rules that make it cheaper to organize and manage the business. Now, maybe there's much more value in optimizing investor cooperation than labor cooperation, and so you could absolutely make an argument for why we should have specialized legal vehicles for investor-owners but not for laborer-employees. But that would have to be an empirical argument to justify the asymmetry, unless for some reason you simply believed wealthy people (those with enough money to be investors) were inherently more worthy than others. You can't simply accuse a union alone of being a cartel, because it's just the flip side of the capitalist/laborer coin. Note that the antitrust immunity enjoyed by unions is, at least theoretically, constrained to permitting individuals to "conspire" in the market for their labor. But that's no different than what investor-owners are doing in a corporation--"conspiring" in the market for capital in a way that increases the conspirators' profits as compared to if each conspirator had to be an active participant in each venture in which he wanted an ownership stake. [1] A negligent UPS driver's liability isn't limited to the economic benefit (e.g. wages) derived from the particular economic activity he was engaged in. His $50k inheritance is at risk, too. Limited liability is the exception, not the rule.

cratermoon 6y ago

The classification of certain jobs as independent contractors was driven by self-interested corporations in several industries, including media and tech. Remember the Microsoft perma-temp lawsuits? Reclassification is not a patch, it's fixing a kludge that was specifically engineered to allow businesses to avoid having to treat their employees as employees.

eplanit 6y ago

A question I have about AB-5: suppose an individual incorporates as an LLC or an S-Corp, where their business is providing driving services. Can Uber/Lyft adapt to engage with these people on a "Corp-to-Corp" basis, and therefore avoid AB-5?