4 ms·

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.
- seibelj 6y ago
  Unions are expensive and the reason they hold power is because they strike. And when they strike they threaten violence against “scabs”, or someone management hires to do the job despite union threats. Unions are simply labor using violence to achieve their aims, which is soaking the payer to enrich themselves. Nothing more and nothing less.
  - crooked-v 6y ago
    > And when they strike they threaten violence against “scabs” It's a massive, incredibly disingenuous leap to act like this is universal.
  - matchbok 6y ago
    You clearly need to read up on a few books on the history of labor kid. Embarrassing comment.
    - seibelj 6y ago
      Why would management subject themselves to a union? It’s because the law makes them once their labor organizes. And if they try to fire their unionized labor they get into a world of pain.
- pdonis 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? If a union wants the benefits of being a corporation, it should be a corporation. In other words, it should put its money where its mouth is and become a business, selling the service of organized labor in a competitive market. If unions really do know better how to organize labor, how to make sure workers are treated fairly, etc., etc., then they should prove it by making organized labor itself a profitable business.
  - wahern 6y ago
    A corporation is principally designed for passive investment of capital, making it easy to put capital to work as well as easy to take it back and put it to work elsewhere. And because the investor can be passive, that means he can invest in many different ventures at once, which is especially useful in a society where a small number of people have far more assets than they have time to personally manage. The motivation is that by making the deployment of capital more efficient, not only does the capitalist enjoy a higher return than he otherwise would (if he didn't he wouldn't bother, afterall), but it's hypothesized that everybody is made wealthier than they otherwise would be. A corporation doesn't provide such reduced friction for labor. A vehicle designed to make it easier for people to pool and bargain their labor requires a different structure. Labor is an intrinsically different kind of asset than money. In order to provide symmetry in how easy it is to collectively bargain labor as compared to collectively bargain capital, you need a legal vehicle tailored to the characteristics of the asset. That's the answer to the rhetorical question I said I'd pose if anybody wanted to play semantic word games. A "corporation" is not a universal, platonic construct for promoting socially beneficial cooperative behavior. Whether we should want to provide symmetry at all is a different question, an empirical question (is everybody better off on average if labor can organize as efficiently as capital?), not one we can answer based on abstract principles, which is what was implied by characterizing unions as cartels.
    - pdonis 6y ago
      > A corporation is principally designed for passive investment of capital One particular type of corporation is, yes--the type that sells stock to passive investors. But that is not the only type of corporation. See below. > A corporation doesn't provide such reduced friction for labor. What you are calling "labor" is in fact a mixture of actual labor--meaning time that can potentially be devoted to productive work--and capital--the skills, training, and knowledge of the people doing the productive work. For most unionized workers, even the ones that are called "unskilled", most of their wages are actually return on capital. So even by your own logic, a corporation, in the narrow sense you are using the term (something that sells stock to passive investors), should be a fine vehicle for efficiently making use of this capital. However, you seem to have missed the fact that what I was describing--a "union" that was actually a corporation, selling the service of organized labor in a competitive market--is not just theoretical; such entities actually exist. They are usually called "worker cooperatives" or something like that, not "corporations", but that's just a matter of choice of words. The point is that they are a way for workers to organize collectively to properly capture the value that is inherent in their ownership of their own skills, training, and knowledge as capital, by having joint collective ownership of a legal entity that provides that capital as a service. In other words, a corporation, in the general sense of that term--a legal entity jointly owned by multiple people. > Labor is an intrinsically different kind of asset than money. Capital is not the same thing as money. And, as above, what you are calling "labor" is in fact mostly capital--just not capital that exists in tangible form as money. It is true that actual labor--a worker's time--is an intrinsically different kind of asset, not just than money, but than any other kind of asset. But a properly organized corporation owned by workers, selling their services in a competitive market, takes care of that asset too, because such a corporation does not sell the workers' time, it sells services, and it prices those services based on their value to the buyer, not how much time it takes its workers to perform them. And that is a much better way to ensure fair treatment of the workers than what labor unions currently do: allowing employers to treat workers as fungible commodities, hours of labor, and then trying to bargain about specifics of how the commodities are handled. > That's the answer to the rhetorical question I said I'd pose if anybody wanted to play semantic word games. It seems to me that you are the one playing semantic word games, not me.
- makomk 6y ago
  A lot of the things that unions do when they "bargain collectively" are things that, in fact, large corporations aren't allowed to do. For example, SAG-AFTRA use the fact that big-name actors are members as leverage in order to force productions to employ only SAG-AFTRA members, who in turn have to agree not to work for non-union productions in order to get work. This is a lot like something that for example Intel got done for in multiple countries - using their control over the supply of laptop processors to strong-arm companies into buying their desktop and workstation chips from Intel too - except with even more restraint on trade, but it's legal because they're a union. Other typical union goals include ensuring that every single hotel, conference center, etc in major cities make use only of their members' services at their fixed prices and ban exhibitors from doing any of those things themselves. If a company or group of companies did this, they'd be in huge legal hot water, but for unions it's fine.

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.
seibelj 6y ago
Unions are expensive and the reason they hold power is because they strike. And when they strike they threaten violence against “scabs”, or someone management hires to do the job despite union threats. Unions are simply labor using violence to achieve their aims, which is soaking the payer to enrich themselves. Nothing more and nothing less.
- crooked-v 6y ago
  > And when they strike they threaten violence against “scabs” It's a massive, incredibly disingenuous leap to act like this is universal.
- matchbok 6y ago
  You clearly need to read up on a few books on the history of labor kid. Embarrassing comment.
  - seibelj 6y ago
    Why would management subject themselves to a union? It’s because the law makes them once their labor organizes. And if they try to fire their unionized labor they get into a world of pain.
pdonis 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? If a union wants the benefits of being a corporation, it should be a corporation. In other words, it should put its money where its mouth is and become a business, selling the service of organized labor in a competitive market. If unions really do know better how to organize labor, how to make sure workers are treated fairly, etc., etc., then they should prove it by making organized labor itself a profitable business.
- wahern 6y ago
  A corporation is principally designed for passive investment of capital, making it easy to put capital to work as well as easy to take it back and put it to work elsewhere. And because the investor can be passive, that means he can invest in many different ventures at once, which is especially useful in a society where a small number of people have far more assets than they have time to personally manage. The motivation is that by making the deployment of capital more efficient, not only does the capitalist enjoy a higher return than he otherwise would (if he didn't he wouldn't bother, afterall), but it's hypothesized that everybody is made wealthier than they otherwise would be. A corporation doesn't provide such reduced friction for labor. A vehicle designed to make it easier for people to pool and bargain their labor requires a different structure. Labor is an intrinsically different kind of asset than money. In order to provide symmetry in how easy it is to collectively bargain labor as compared to collectively bargain capital, you need a legal vehicle tailored to the characteristics of the asset. That's the answer to the rhetorical question I said I'd pose if anybody wanted to play semantic word games. A "corporation" is not a universal, platonic construct for promoting socially beneficial cooperative behavior. Whether we should want to provide symmetry at all is a different question, an empirical question (is everybody better off on average if labor can organize as efficiently as capital?), not one we can answer based on abstract principles, which is what was implied by characterizing unions as cartels.
  - pdonis 6y ago
    > A corporation is principally designed for passive investment of capital One particular type of corporation is, yes--the type that sells stock to passive investors. But that is not the only type of corporation. See below. > A corporation doesn't provide such reduced friction for labor. What you are calling "labor" is in fact a mixture of actual labor--meaning time that can potentially be devoted to productive work--and capital--the skills, training, and knowledge of the people doing the productive work. For most unionized workers, even the ones that are called "unskilled", most of their wages are actually return on capital. So even by your own logic, a corporation, in the narrow sense you are using the term (something that sells stock to passive investors), should be a fine vehicle for efficiently making use of this capital. However, you seem to have missed the fact that what I was describing--a "union" that was actually a corporation, selling the service of organized labor in a competitive market--is not just theoretical; such entities actually exist. They are usually called "worker cooperatives" or something like that, not "corporations", but that's just a matter of choice of words. The point is that they are a way for workers to organize collectively to properly capture the value that is inherent in their ownership of their own skills, training, and knowledge as capital, by having joint collective ownership of a legal entity that provides that capital as a service. In other words, a corporation, in the general sense of that term--a legal entity jointly owned by multiple people. > Labor is an intrinsically different kind of asset than money. Capital is not the same thing as money. And, as above, what you are calling "labor" is in fact mostly capital--just not capital that exists in tangible form as money. It is true that actual labor--a worker's time--is an intrinsically different kind of asset, not just than money, but than any other kind of asset. But a properly organized corporation owned by workers, selling their services in a competitive market, takes care of that asset too, because such a corporation does not sell the workers' time, it sells services, and it prices those services based on their value to the buyer, not how much time it takes its workers to perform them. And that is a much better way to ensure fair treatment of the workers than what labor unions currently do: allowing employers to treat workers as fungible commodities, hours of labor, and then trying to bargain about specifics of how the commodities are handled. > That's the answer to the rhetorical question I said I'd pose if anybody wanted to play semantic word games. It seems to me that you are the one playing semantic word games, not me.
makomk 6y ago
A lot of the things that unions do when they "bargain collectively" are things that, in fact, large corporations aren't allowed to do. For example, SAG-AFTRA use the fact that big-name actors are members as leverage in order to force productions to employ only SAG-AFTRA members, who in turn have to agree not to work for non-union productions in order to get work. This is a lot like something that for example Intel got done for in multiple countries - using their control over the supply of laptop processors to strong-arm companies into buying their desktop and workstation chips from Intel too - except with even more restraint on trade, but it's legal because they're a union. Other typical union goals include ensuring that every single hotel, conference center, etc in major cities make use only of their members' services at their fixed prices and ban exhibitors from doing any of those things themselves. If a company or group of companies did this, they'd be in huge legal hot water, but for unions it's fine.