Debating Judith Sloan on labor markets

Yesterday I took part in a debate with Judith Sloan, organised by the Economic Society of Australia, on the topic of labor market regulation. Before commencing, Judith paid me the backhanded compliment of saying that debating me was “like wrestling an eel”. I’ll take the complimentary part of the implication as “very difficult to beat”, while rejecting the suggestion that I’m prone to slipping from one position from another. I admit that I haven’t maintained the exact consistency of those market liberals (like Sloan) whose views appear to have remained unchanged since abotu 1980, but there has been a lot of data since then, some of it supporting the case for market liberalism but a lot going the other way.

My slides for the debate are online in PDF format and also Keynote for Mac.

70 thoughts on “Debating Judith Sloan on labor markets

  1. I’d like to see a transcript of the debate and/or a video of it if that exists.

    Also, I think Judith Sloan might have her metaphor wrong. What she probably meant was that debating with John Quiggin is like wrestling with an Anaconda. A series of powerful coils of fact and analysis wrap round the victim who then has all the hot air expelled from his or her argument.

  2. Is that slide show serious? Or a joke?

    At first glance some 30%, possibly half, of those bullet points are so far wrong it is almost beyond belief.

    It reads like the sort of misinformation that is dished out in union lodge meetings.
    It is totally unconnected to what happens in practice. (Then again, very little theorizing, when applied, pans out in the way it was theorized!)

  3. @Steve at the Pub
    Excellent and appropriate response Steve – for a pub rant – villification, no information of value, and a random statistic thrown in with no clear basis. I guess John must have been largely on target.

  4. Ms Sloan, in my humble opinion, doesn’t merit talking too let alonne debating. There are some whose credibility you ought not endorse. Oz frequent contributor or not.

  5. @Newtowian: Crikey, It is at first glance. I’ve not got the time to point out the obvious errors, they stand out at anybody who reads them, fer hex ache.

    @ Ikonoclast: As you say, I’m right, as usual.

  6. Steve at the Pub :
    @ Freelander: Alcohol kills brain cells? I’m reminded every time you put fingers to keyboard.

    If the effects are now so apparent as blind Freddie and all bring your various deficiencies to your notice, doesn’t it occur to you that its time to stop.

  7. In Victoria on the local news this morning, I think, a spokesperson for a group with a name like the “Business Council of Victoria” said that double pay for Sundays should be abolished.

    This seems to have been quickly hushed up. I can find very little on the web about this specifically. The closest is: Keep Sunday penalty rates, demands Government in the Herald Sun.

    That the anti-union, anti-public-service governnment of Ted Baillieu has gone on record as demanding that Sunday penalty rates be kept has shown how opposed to this measure vested interests have judged the broader community to be.

    However, the intention of weekend penalty rates has been largely undermined by the need of many for more money than can be earned in a normal working week. Many are now forced to work longer hours and on weekends, with two or more in many households working in order to make ends meet — thanks to the “efficiency” brought to the Australian economy by the “reforms” that have been imposed upon Australia by Paul Keating and his neoliberal disciples since 1983.

  8. We got a glimpse of advanced “flexible” work environments in Romney’s recent fundraising dinner gaff were he points out that some 40% of US workers were earning so little that they fell below the minimum tax paying threshold. This entitled Romney to call these people hangers on and a tax burden.

    That is the end game for free reign of working conditions by employers. I heard the recording of Romney’s talk and he very clearly knew what he was saying, and was happy to use the denegrating the plight of this very large section of the US community just to make political capital with his $50,000 a plate audience.

  9. @Malthusista
    Philip Clark (I think) on the ABC was interviewing one of their spokepeople a couple of days back and the dropping double time on Sundays bit was front and centre.

    If I recall his two lines of argument were:
    – “well the fast food industry generally doesnt pay penalty rates so we need consistency.” – implying the need to move to a lowest common denominator or no penalty rates.
    – for people who can only work on weekends because they are otherwise occupied studying and caring at other times sacrificing their limited free time for such part time work shouldnt be seen as a sacrifice because these are their natural working hours and therefore they should just be flexible.
    – if people cant get work with reasonable wages they should be free to take lousy wages and become what the US refers to as the working poor – people with 3 jobs who still cant make ends meet because rates are so low.

    Pressed on the second point of why people who dont have any choice but to work at lousy hours should just accept these as normal hours he disembled. I had the sense that the interviewer being in an industry with lousy working hours was unhappy with being told these should be normalised.

    The good side was the spokesman was a lousy communicator and clearly was recycling poorly structured policy lines.

    Another nice thing was that for a change the interviewer took him to task in an old fashioned probing way – something that rarely happens in the media unless it is some sort of current affair shock horror set piece.

    I got the sense too though this was part of an orchestrated campaign and your comments seem to support that – when these things pop up on the radar simultaneously you have to wonder about what coordinated PR campaign is in play.

    In respect to the latter its always interesting to look at the quality. Consider the current very expensive and slick ‘Miners are sensitive environmentalists’ stuff we currently have on the television. Apparently the people behind this campaign dont have a budget to stretch this far and present a heartstring tugging campaign.

    I wonder if SATP is ‘running interference’ – certainly the quality of his comments suggests budget price trolling PR.

  10. @Steve at the Pub

    To amuse yourself with my twittering (I don’t have an account, so strange comment in itself) you feel you need to be inebriated. Sad, sad man.

    Could be worse. Could be Steve at the Casino.

  11. Very hard to argue with SATP as he hasn’t given any debate at all.

    If he think some of the slides were wrong he could point out which ones.

    I think John has merely proved we have adopted the right amount of labour market flexibility.

    to go to one such part. You can only reduce minimum wages equitably with the advent of family tax credits BUT we do not have the revenue for that now.

    you simply cannot reduce nominal minimum wages so how can you reduce them as they are far too high?
    No-one has an answer

  12. The funny thing about these slides is that they are just so prosaic and obvious – banal almost. I mean, everyone with half an ounce of common sense knows that these things are largely true.

    It’s a pity that the phrase “labour market reform” has to be code for stripping workers rights. Why does it have to be so? I’m not sure that the system is perfectly balanced at the moment, and that there can’t be some give and take on both sides, but the phrase isn’t about that, it’s all about giving more power to capital. Weasel words.

  13. If you have ever had to work with these idiots …
    They’re tragically mindless like their equivalents of thirty years ago on the left.

    There continuous calls for reform have echos of the lefts continuous revolution. Talk about job security.

  14. Here’s a thought, or two?

    How about “Capital Market Reform” or “Managerial Market Reform”?

    Seems sort of obvious, in a GE setting, if you make what is, was, the most competitive market more competitive, don’t you increase market power in the other markets and isn’t the overall impact worse not better?

  15. In the wake of Senator Bernardi’s “speech” yesterday,
    does Prof. Sloan’s comment of debating Prof.Quiggin as akin to “wrestling an eel” assume new meaning?

  16. I am just coming to the end of 2 weeks in Ho Chi Minh city, Viet. It has been an amazing trip; we have taken a lot of time to actively engage with Viet people of all types. Needless to say the concept of ‘labour market reform’ in Viet. is vastly different to Australia. The population of HCMC is in the region of 9 million and projected / planned towards 20 million by 2020. Yesterday we spent several hours walking around Cholon, Dist. 5, {Chinatown}, in several streets were seemingly identical small businesses, one after another, hundreds of them, all geared towards hardware, nails, screws, saws and spanners, metal pipe, fittings etc. etc. I commented to my partner, ‘it used to be kinda like this at home 30 odd years ago, if Steve’s hardware on the corner didn’t have it, you went to the next suburb and looked in Johns handyman centre’. Now of course you go to Bunning’s or Home, that’s it, that’s all, is it progress, yes of course it is, has it been worth it, no sorry it hasn’t.
    Here there is a sort of collective care and share, the competition is keen and intense, but everyone wants to everyone to succeed, the pride is collective as much as it is individual. The brief example above is just about hardware, you see it repeated across every supply requirement, a city of 9 million takes a lot of supplying by a lot of people.
    I do not believe that it will be sustainable into the future for our labour markets to just go on as they always have in the past. Labour market reform doesn’t have to be about stripping away workers’ rights, it can be and should be so much more than that. It should be first and foremost about a shared vision of what that business, its owners and partners want it to be, where they want it to go and how they will get it there, who or what can it best serve. It is about so much more than the individual vision, effort or reward, the days are long gone when I work FOR somebody. I now commit to working WITH, somebody, some business, some shared vision and I don’t ask or expect any more than just that, from them in return. So for me at least new work place agreements, labour reforms, employee relations, they all guarantee a return on the value of my input and effort, based on the needs of the business and its vision. I now work in an area that has abolished the terminology of ‘human resource’, I am not a piece of rock or a slab of stone, nor am I a lump of putty to be shaped and moulded. I am in reality a person, one that needs to be supported, encouraged, and trusted, in fact managed and developed in a full partnership of shared vision and potential reward.

  17. @Xevram
    Agree with all that. I’ve also been there and the impression the place left me with was similar. I remember the smiles and the sense of community and what struck me most was the sense of living within their means, no McMansions or 6 plasma TVs per household. Truly lovely people.

  18. @Troy Prideaux

    Yes. The loss of cohesion, sharing and caring, and the rise of all about me narcissism has in the West, has to be a concern to all thinking reflective beings. HeII I’ve even noted myself becoming less saintly over the years!

  19. John, the issue of labour market regulation is front and centre in Schumpeterian growth theory – a field led by Philippe Aghion:

    • Far from the global technological frontier, strong employment protection laws are more benign because they promote firm-specific human capital accumulation in an environment where big incumbents implementing the simpler technologies from abroad.
    • Closer to the world technology frontier, there is a switch to innovation-based strategy with short-term relationships, younger firms, less investment and better selection of managers are much more important.
    • Faster entry and exit of firms are central to technological upgrades near the frontier, with light regulation of hiring and firing necessary to ensure that new and old firms can adjust and adapt workforces quickly as they move in and out of new technologies.

    David Autor is one of many contributing to a literature on unfair dismissal laws showing that they reduce the employment of women, younger workers, and less-educated men in the short term, and potentially older and more educated workers in the longer term.

    Others have shown that one reason for the US being more productive than the EU is differences in employment protection legislation.

    the high employment protection countries have relatively smaller ICT-intensive sectors than the low employment protection countries. Firms adopt less risky technologies because they cannot easily lay-off workers if the investment does not work out.

    I will leave the scourge of dual labour markets in the EU to another time.

    p.s. Richard Rogerson has written extensively on the economics of EU employment protection and how it is a minor player in euro-sclerosis.

  20. Blah, blah, blah

    Of course theory has a lot different meaning in economics than it does in science.

    In science it tends to mean a model of some aspect of reality strongly bolstered by fact and experimental evidence. In economics, to often simply wild speculation, frequently well refute by evidence.

    Jumbo subscribes to the quasi religious great dead ones venerated writings school of economics. He ought to have worked for the Industry Commission! Would have fitted right in!

  21. Economic theorizing reminds me of what Von Neuman claim about what he could do with only a small number of parameters. The literary approach, except in the hands of someone like Keynes, even more diabolical than mathematical theorising, though often more appropriate in trying to look where the keys were lost than under the lamppost where the light Is.

  22. Freelander @29, “like”.
    Is it wounded sensibilities or the palpable sense of an insult to a person’s intelligence?
    And isn’t it the sort of false consciousness mentality that I think our host fears is turning economics and pol economy, education and the hard work of (spurned) actual reasoning and objective study into a press-ganged street-walker for denialism, conceit and prejudice; ignorant in its arrogance and arrogant in its ignorance?
    Religion for RI, the classroom for education, or we do indeed have illiterate auto-didacts uncomprehending of the value of light, perversely looking for the keys in the darkness, while the lamppost vicinity is pointedly ignored.

  23. @paul walter

    Yes. The increasingly dangerous 21st century we are now more than a decade into, scares me less than our ever diminshing capacity to work together and meet the challenges.

  24. In the what is the world coming to files :

    You have Google making money out of hosting this and other vile stuff on YouTube and providing links to things they ought not yo link to, with corporate motto “Don’t be evil” (now supposedly shortened) all for the Almighty dollar and under the guise of “freedom of speech”. Freedom of speech has never entailed an obligation on others to provide a free vehicle to publish and publisize anyone’s speech. Let’s be honest if avoiding evil is no longer Google’s core value, it’s all about money.

  25. @Freelander

    Further to Von Neuman’s claim the following may be of interest:
    1. DYSON, F. 2004. A meeting with Enrico Fermi. Nature, 427, 297-297.

    In this on Freeman Dyson relates the story and how it applied to his putting utilitarian fitting of a pet theory to experimental data. Fermi gently dumped on him using the principle that substance is central – not rationalization.

    2. BURNHAM, K. P. & ANDERSON, D. R. 2002. Model selection and inference:A Practical Information-Theoretic Approach (2nd Ed.).

    In the introduction the authors of this classic text report on a half joke experiment in the 1970s I think where someone used fourier transforms to literally fit the elephant to a random set of data. The result was elegant and instructive.

    The buzz word here is parsimony – getting the balance between reality, models and inference right and recognising all the residual limitations.

    3. Though the latter required 30 variables to make a passable elephant there is in fact on the web somewhere a wiggling elephant constructed out of 5 variables with a bit more tweaking. Its quite cute and very clearly an elephant.

    I particularly recommend the 1 page Nature story which economists might benefit from reading too (does Nature ever publish economics articles?). The interesting thing about the physicists is that so many are softly spoken and humble in contrast to the current fashion for self aggrandisement.

    Also in last week’s Guardian Weekly there is a nice review of Kuhn and the origins of paradigm theory. He also started as a physicist. The reviewer interestingly ends on a sour note deploring the problems of economics arising from a lack of self awareness characteristic of hard science.

    That said a lot of what I’ve read lately not least here on Johns site suggests Western Economics is either in the throws of a serious paradigm shift – or is about to as the Vatican did in response to Galileo – i.e. purge the unbelievers and so begin a slow decline into an irrelevant intellectual culdesac.

  26. Hahahaha, “don’t be evil” indeed. That’ll work – just as well as the advice Jesus gave us to ‘do unto others’ has worked for Christians.

    But debate Judith Sloan? Good grief, I saw her on the Drum the other evening and she demonstrated again, as if I needed any more evidence, that she is either too stupid to understand the complexity of Obama’s point about ‘not building that’ or too dishonest to admit that what he said is true.

    Seemed like a troll to me. She’s definitely a dinosaur – but not a cow – if she thinks that bit of silliness will play to any but the welded on rightwing hypocrites.

  27. @Julie Thomas

    She is on a heap of boards and earns, or more accurately gets, oodles of money. Hence, the right-wing hairy chested posturing does something for her. If nothing for her looks.

  28. Freelander she’s the token female these right wing boards need to have so they can show they are not sexist. But don’t stoop to criticise the appearance – she obviously tries and spends money on looking her best and that’s better than Gina manages with even more money.

    There are plenty of other areas in which her shortcomings can be discussed with some degree of politeness and I do think that there are arguments in favour of ‘good manners’ and ‘taste’; not the sort of fascist and self-serving rules about these things that conservatives favour though.

    Her statement that debating JQ is like wrestling with an eel, suggests to me – based on my study of and experiences with IQ testing – that she is a concrete thinker with an IQ in the 120 – 130 range whereas JQ can do abstract thinking and would be in the 150-160 range.

    Personality wise, she is ‘stolid’ and is not easily intimidated which is a great advantage to have over the caring and sharing type people who are usually more circumspect in their ability to know the truth, and she has enormous amounts of self-confidence; another character trait that is difficult for the caring and sharing types to master.

    Her disdainful attitude toward those human beings she doesn’t value, those who she has judged to be lazy and stupid, is an indication of a limited ‘intelligence’ – also goes for STAP but you know that.

  29. Freelander she’s the token female these right wing boards need to have so they can show they are not sexist. But don’t stoop to criticise the appearance – she obviously tries and spends money on looking her best and that’s better than Gina manages with even more money.

    There are plenty of other areas in which her shortcomings can be discussed with some degree of politeness and I do think that there are arguments in favour of ‘good manners’ and ‘taste’; not the sort of fascist and self-serving rules about these things that conservatives favour though.

    Her statement that debating JQ is like wrestling with an eel, suggests to me – based on my study of and experiences with IQ testing – that she is a concrete thinker with an IQ in the 120 – 130 range whereas JQ can do abstract thinking and would be in the 150-160 range.

    People in the 120-130 range are smarter than most people so they assume that they are smarter than all of us; they don’t realise – don’t want to know? – how many of the lazy and stupid at the bottom of the heap actually are more intelligent, more hardworking and ‘better’ people than they are.

    Personality wise, she is ‘stolid’ and is not easily intimidated which is a great advantage to have over the caring and sharing type people who are usually more circumspect in their ability to know the truth, and she has enormous amounts of self-confidence; another character trait that is difficult for the caring and sharing types to master.

    Her disdainful attitude toward those human beings she doesn’t value, those who she has judged to be lazy and stupid, is an indication of a limited ‘intelligence’ – also goes for STAP but you know that.

  30. @Julie Thomas
    Thanks for these tibits Julie. As an outsider I’m not very familiar with these what would you call people like her – “academic cheerleaders”?. I dont mean this in a sexist fashion but rather that many men and women in the media and the academy seem to take on a cheerleader role for captains of business and I guess always have if you count the theologians of the ancient temple cultures.

    Some examples I am familiar with are the wise monkeys of Business Spectator who seemed at first to me credible and balanced – but on closer examination seem just sophisticated versions of the legendary Tom Pitrovski with his ‘The market goes up and the market goes down’ lines or perhaps groupies out for the free lunch at AGMs.

    A perhaps more comparable beast I have watched a little who is perhaps closer to Judith Sloan might be Janet Albrechtson. I started monitoring her around 2009 when she wrote a piece blaming the the US housing crisis on the people who took out dodgy loans thrust without for a second questioning the theory, ethics or the management systems of the loan spookers who gave us CDOs CDSs Mortgage back secutiries and the rest of this product zoo. Truely it beggars belief how experts and powerful people who gained their status and ‘credibility’ based on support for the 2008 madness can criticise anyone while maintaining straight faced denial that they really blew it (which is of course the topic of John’s opus).

    Perhaps you could compare and contrast Judith with these or other more familiar reference cases?

  31. I enjoyed an economist conference in Perth in 1993 where someone deliver a paper on supplier-induced demand in medicine. From the audience the dear lady bellowed that there could be no such thing. A friend and former colleague then instantly jumped to the speakers defense by saying something along the lines of. “Well , these economists seem to think there is such a thing… ” He then prattled off a long list of famous economists starting with Kenneth Arrow.

  32. @Newtownian Business Spectator appear to be ahead of the curve but if you keep track they are just spouting nonsense eg Alan Kohler, who once touted buying BHP in volume “and why wouldn’t you?”, had a panic attack last Xmas and sold all his shares saying that the market would crash and we are all doomed.

    But enough people subscribed to their stuff to make BS marketable and they made a nice profit when selling to News Ltd. So while Kohler lost badly on his market predictions the $8M he pocketed from selling BS made it all worthwhile.

  33. @rog Also a lot of what passes for informed commentary in BS is only recycled promos by big business hence you get all the quasi political stuff as well, eg climate change, free markets, carbon tax etc. I am sure that a bit of horse trading goes on to maintain access to these corporate heavyweights. Had BS given truly critical analysis I am sure that the phones would have stopped ringing and there would be less BS to publish.

  34. The debate about productivity won’t go away because it is a serious issue in this country and many in the business community and those of Judith’s thinking will continue to target industrial relations and labor market reform as being the primary ticket to improve productivity. At 1st glance, of course I can see why so many jump to that conclusion, but what I fail to understand is why very few appreciate the most significant cause of our productivity issues is trade policy, not industrial relations.

  35. There is nothing significantly wrong with our productivity, and reform institutions like the PC, in net, have only subtractef from, rather than added to our productivity. I say net because on occasion some reform reports and recommendations have got it correct. Sadly outweighed by the simply wrong.

  36. Newtonian, “A perhaps more comparable beast I have watched a little who is perhaps closer to Judith Sloan might be Janet Albrechtson.”

    lol I think you are onto something. But Janet, or Dame Slap as Dorothy Parker from the loon pond calls her, doesn’t get on The Drum as much as Judith does so I don’t really have much data on her to work with ;). I don’t read Sydney newspapers but from what I have read or heard about her, she seems to be quite happy to walk on stupid side of the road.

    There is some interesting work on ‘motivated reasoning’ which attempts to explain how intelligent people can choose to ignore facts and evidence and maintain their discredited beliefs. The main idea is that they are willing to do this to maintain their valued identity as a member of a group. This works for both left and right wingnuts of course but it is only the right who can afford to pay people to ignore their good sense.

    You might find this site interesting; check out the blogs; it’s a US site but they recently measured Australian attitudes toward climate change.

    And this link is to the Loon pond piece in which Dorothy has a say about Janet and assorted other suspects.

  37. Judy Sloan who thought the NBN was off the balance sheet.

    The only problem was it was the fourth item in the Budget paper statement no .7 .

    That is the part talking about assets.

    Typical Catallaxy research effort.

  38. Given what she manages to get for what she does, no one could afford the cost if she were to engage in serious research! For starters someone would have to finance her obtaining a basic sound education first. A sound education being a prerequisite for anything more.

  39. John, Ed Lazear proposed a baseline that employment protection laws have no effect on employment, welfare of workers, and profits if they can be undone by Coasian bargaining:
    • A law mandating redundancy payments is undone if the wages paid earlier in the job can be reduced.
    • The same for superannuation: many pension funds originated as a back-end loading of career pay to encourage high performance and reduce shirking. Net lifetime pay was higher because of higher productivity, less shirking, and lower monitoring costs.

    Lazear’s neutrality result is varied by changes in his assumptions but the most interesting of these is red-tape and procedural costs and where payments are made to third parties.

    Red tape and procedural costs that cannot be undone by contractual arrangements reduce job creation because the net discounted value of posting a new job vacancy is lower. Job destruction is also lower because it is more costly for firms to lay off workers.

    A robust finding is countries with the stricter employment laws have more stagnant unemployment pools. Higher youth unemployment rates and lower unemployment for the central age groups who are typically insiders (they have a long-term job sheltered by employment laws). Young people and females with intermittent labour force participation are the outsiders looking in.

    Such is the lot of social democrats – enforcing Directors’ law for regulation as well as for spending.

    For more information, see The Economics of Imperfect Labor Markets by Tito Boeri & Jan van Ours

  40. Alot of ex post long bow interpretation of Saint Ronald McDonald Coase has breathed in deep meaning where none existed. But so it has always been with all religions.

    “Coasting Bargaining”? Ain’t no such beast.

    Any other venerated great ones, whose theology you would like us to worship?

  41. A further interesting thing to note. There are no “results” or theorems in a proper science. (Except,of course, mathematics, if one counts it in as a ‘science’.)

  42. But religion abounds in ‘results’ and quasi theorems, often built for thousand’s of year on some sheppard boy’s addled prattlings.

  43. @Newtownian

    I am not sure if Nature publishes economics articles but it does publish Science Fiction (Robert J. Sawyer Nature: International Weekly Journal of Science (“The Abdication of Pope Mary III,” 6-12 July 2000). It was an invited article.

  44. If the Mary herself, the one impregnated by Zeus while he was a swwan, or am I getting my myths mixed, up (?), well if the Mary, how ever impregnated by the god of gods, if that one, were to descend from heaven and slap down her application for that job, she’d miss out. Simply missing the basic requirements: old white male virgin, preferably with a special love of young boys.

    So, indeed, truly a work of science fiction.

  45. John, I wonder if you under-sold the efficiency enhancing role of unions as set-out in Alchian and Demsetz (1972) – their modern classic on the theory of the firm.

    Employee unions, whatever else they do, act as monitors for employees.
    • Employers monitor employees and employees monitor employers.
    • Are correct wages paid on time? Usually this is easy to check.
    • But some forms of employer performance are less easy to meter and are at risk to employer shirking.

    Fringe benefits often are in non-pecuniary, contingent form: medical, hospital, and accident insurance and retirement pensions are contingent payments or contractual performances partly in kind by employers to employees. Each employee cannot judge the character of such payments as easily as with money wages.

    A specialist monitor – a union hired by employees- monitors those aspects of employer payments to employee that are most difficult for the employees to monitor.

    Because of economies of scale in monitoring and enforcing such contracts, unions may arise as a contracting cost-reducing institution for employees with investments in specific human capital and back-loaded pay including pension plans.

    In addition to narrow contract-monitoring economies of scale, a union creates a continuing long-term employment relationship that eliminates the last-period (or transient employee) contract-enforcement problem and creates bargaining power (a credible strike threat) to more cheaply punish a firm that violates the contract.
    • As a union makes it more costly for a firm to cheat an individual worker in his last period of work, workers are more likely to invest in specific human capital and accept back-loaded pay schemes, both of which raises their career wages.
    • A strike is a cheaper way to enforce a contract than litigation. Many firms stop dealing with a bad customer/unreliable supplier until a bill or problem is fixed.

    Unions are more likely to exist when the opportunistic cheating problem is greater, namely, when there is more firm-specific human capital present.

    Unions perform many of the functions carried out by professional agents in the sports and entertainment industries. These specialists know the going rate for your specific talents; act as a credible and informed negotiating agent; warn you off bad employers; and punish bad employers by not referring future clients to them.
    • The traditional literature on unions argues that unions act as a productivity shock and give employee voice in workplace affairs, which lower job turnover.
    • Unions as an institution to reduce contract negotiation and enforcement costs is better nested in the modern theory of the firm.

  46. @Jim Rose #14: Makes one cry to absorb your comment, comparing the entity you write about to the unacountable corrupt farce that unions have become in this country.
    Proved by their natural constituency, the worker, mostly declining to join one.

  47. Thanks. Now we can all engage in A & D worship. Yes, that paper, as are so many others, worth a read, but the reverential attitude is not something they, that paper, anyone, or anything deserves. Great reverence is an anathema to critical reasoning.

  48. As for the dissolution of unions. Unions no longer see doing the unions traditional job as part of their job, and unpunished free-ridering opportunities started to explode.

  49. @rog
    To be fair, I would be surprised if jimbo has not read the A&D paper. To be fair, unlike some on the net I don’t think, for the most part at least, Jim is attempting to pass himself of as having knowledge or education he does not possess.

  50. John, Adriana Kugler writes often on the impact of dismissal costs – also called firing costs or employment protection – on the operation of labour markets:

    • David Autor, William Kerr and Adriana Kugler. “Do Employment Protections Reduce Productivity? Evidence from U.S. States.” Economic Journal (2007).

    • Adriana Kugler and Giovanni Pica. “Effects of Employment Protection on Job and Worker Flows: Evidence from the 1990 Italian Reform.” Labour Economics (2008).

    Her evidence, which is suggestive rather than decisive, is that wrongful-discharge protection reduces employment flows and firm entry rates. Plants engage in capital deepening and experience a decline in total factor productivity, indicative of altered production techniques, there is alos reduced new entry by firms.

    Kugler is Chief Economist at the U.S. Department of Labor so that rules her out as a republican party hack.

    Perhaps you should amend to slide to note that many economists favour reforms to employment laws because many of these laws, as they stand, are widely believed to reduce dismissals, hirings and productivity. The same economists consider that labour market deregulation to be effective in generating new jobs and reducing administrative barriers to entrepreneurship

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