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Comment by rayiner | Hacker News Reader

Is there economic theory supporting unions? Asymmetric negotiating leverage is not generally recognized as something that undermines market outcomes.

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To the extent that it's difficult or impossible for the workers to get another job, the employer has buyer's market power (in the extreme, a monopsony). It's a well-recognized phenomenon in economics literature.

https://www.investopedia.com/terms/m/monopsony.asp https://en.wikipedia.org/wiki/Monopsony

Like a monopolistic market, a monopsonistic market is inefficient compared to a competitive one. Employers gain "utility" at the expense of workers, but less than the workers lose compared to a competitive market.

Unions can remedy this by becoming a monopolistic (or near monopolistic) supplier of labour, by negotiating a higher wage (price floor), bringing the wage closer to it would be in a competitive market.

Long story short: if you're pro competitive markets, you need to recognize the benefits of unions. They're not an ideal solution, but the alternative is not a competitive market outcome.

Edit: this seems like a pretty good explanation: http://www.economicsonline.co.uk/Business_economics/Monopson...

But you don't care about market outcomes, but about your own personal outcome (and I assume the economic theory alluded to wasn't macroeconomic but micro). The market can converge to fair non-union wages, or it can converge to fair union wages, which would be higher. Capitalists claim that unions reduce overall profit and harm the market, but workers shouldn't care about that (i.e. lower stock performance and higher wages are better for workers, at least in practice, given actual wealth distribution).

You are forgetting about customers. I own no companies and work for one company, but I am a customer of many. A personal cost/benefit analysis like the one you're describing would have to take that into account.

The way it works is that management involves the union in its decisions, and they reach compromises. After all, it is also in the union's interest that the company stays viable. If all the increase in wages gets is paid for by an increase in prices, and management isn't willing to cut profits, then that's unlikely to be acceptable to the union. The goal is to keep the company performing well, but to even the playing field when negotiating the distribution of profit among management, shareholders and employees. This is called co-determination: https://en.wikipedia.org/wiki/Co-determination

Individuals might prioritize personal outcomes over market outcomes, but societies and governments should prioritize the latter.

> but societies and governments should prioritize the latter

Societies should prioritize according to their values. I don't think that maximizing GDP is a universal value.

Yeah. The consumer optimum is heavily exploited workers, as that drives labor costs down as much as possible. We're looking for a reasonable balance, so the value created by labor is shared between consumer, producer, and the many other people in the value chain.

I'm not an economist, but, free market theory favors lots of competitors, fully informed customers, and low barriers of entry which can be thought of as trying to keep consumer and supplier with a balanced amount of leverage (too much leverage on the supplier's side creates monopolies, for example).

Also, it's not really about positive market outcome in general (optimized market), but about positive outcomes for the employees.

> I'm not an economist, but, free market theory favors lots of competitors, fully informed customers, and low barriers of entry which can be thought of as trying to keep consumer and supplier with a balanced amount of leverage (too much leverage on the supplier's side creates monopolies, for example).

That's a pretty strong argument against unions in the US, then, since (unlike in other countries) there's no competition between unions at an employer, there's almost no ability to deauthorize a union in practice (ie, choose a different union), and very high barriers to entry (very difficult to authorize a different union for representation in place of an existing one).

But the problem is that employers also have high barriers of entry (it's not easy to switch jobs, especially if you have to relocate), and there's usually low competition for blue collar work, since there's higher demand, which makes employers have overwhelming leverage. There are industries where that doesn't apply as much, and you can see that workers can get better compensation and benefits in those. Unions can equalize that leverage.

I do think that unions could also have too much leverage, but I think that finding a happy medium is a worthy legislative goal.

Asymmetric negotiating leverage is a key element of Marx's theory with regard to profit.

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