Monday, December 1, 2014

Trade Unions

Generally speaking, folks who share the same camp as me tend to shy from supporting the idea of trade unions. Even absent the risk of corruption, even without union management slowly but steadily alienating the workers they represent, even when everything is going according to the stated goals of the organization, it's tough for folks who believe in the freedom of individuals to associate with whom they choose (under the contract terms they find amenable) to support exclusionary labor cartels with great cheer.

Part of Smithian political economy is devoted to the endless task of slaying the mercantile hydra without the benefit of a barrel of pitch. To use a well-worn metaphor, mercantilist economics is concerned with how to divide the pie of national opulence, whereas marginalist economics is concerned with how to make the pie bigger. Who cares, goes the argument, how large your relative slice is, so long as the absolute slice is bigger than it would have been under an alternative arrangement. That's why we here at EE get away with (or try to, anyhow) cheering suboptimal arrangements like sweatshops, organ sales, and drug and sex work legalization. It's not because we're fond of low wages, desperate hawking of a kidney to pay for bread, shooting smack, or visiting a dingy massage parlor. It's because the next most attractive alternative is often dirt farming, starvation, overdosing, and vice units stretched too thin to actually pay attention to the horrors of real-deal human trafficking. Sweatshops at least give their workers the slim change of scrimping a few bucks together to send their kids to college (or to America, God willing). No such options exist for subsistence farmers.

So why bother turning any attention to a dying institution? Trade unions, after all, exist to protect workers' share of producer surplus against a specific threat: the threat of cheaper domestic labor. Unfortunately for the needleworkers, auto welders, elevator constructors... well, check the wiki page for a full list, scabs aren't the only threat to union members' wages. Capital mobility means that firms can shutter domestic plants and hire labor elsewhere in the world. Capital deepening (and cheap credit) means that firms can more easily shift towards capital-intensive production (more robots). If you're a consumer, you welcome the greater abundance of material goods available at lower prices. If you're a neoclassical economist, you welcome the triumph of your discipline over the craven misanthropy of the mercantilists, or something. But if you're one of the poor saps with your leg caught in the transitional gains trap, smug smirks decorating economists' lips is salt in the wound. You, after all, are the one swept up in having to train for an economy that has little to no use of the skills you worked so tirelessly to perfect in yon Detroit factory.

"So you have to learn some new skills" they say, those tweedy, reedy economists. "The gain to society brought by greater productivity more than offsets your personal loss." They remind you from their tenured positions that job security is not in the description, and that uncertainty is an inescapable condition of life. While I share many of these sentiments, I also give occasional thought to alternative institutional arrangements that could both provide a robust, dynamic economy and make sure that workers (who retain dignity both on the clock as workers and off as shoppers) don't get bruised too badly when they get thrown out on their keister by the robot uprising.

There's something of an agreement in economics that the government should provide those public goods not produced by private voluntary associations. Depending on whom you ask, the set of public goods can be quite expansive, or it can be extremely narrow. I'd guess that if you polled a random selection of professional economists (the KFF Survey of Americans and Economists on the Economy doesn't ask this specific question), a majority would claim that low, stable unemployment is a public good, while a very large supermajority would agree that an individual job is a private good (at least for the worker; many would also acknowledge that from the point of view of the public and the firm, labor is a production cost).

I confess to being a bit of a Cassandra when it comes to the pending demographic pressures faced by US residents. An aging population coupled with anti-immigrant sentiments, berserk spending by local and state political elites who find themselves unbound by any hard budget constraints, and a constituency characterized by a curiously strong faith in the ability of the sovereign to immanentize the eschaton by executive fiat. In other words, the US has some very large, very politically powerful public unions whose members will command immense tax-funded pensions upon retirement. And if taxation technology (remember that income taxes are merely one way of funding government) can't keep up with the promises made to police, fire, teachers, & al by politicians now decades out of office, the alternatives will be actuarially messy. Debt financing of pensions can lead to big-brick interest payments (and God forbid you actually have to start issuing debt in order to keep up with interest payments). Giving pensioners a haircut is an option, but the political fallout of that kind of decision would be nasty enough to give even a nation of Scott Walkers pause. You could default on the sovereign debt I suppose, but I'll leave the consequences of that as an exercise to the reader.

Thus the pickle: except for a few wild-haired libertarians, everyone agrees that society needs a decent police force, a reasonable public education system, and (as long as every other sovereign nation on earth is armed) some appropriate level of national defense. We also all mostly agree that the total lifetime compensation for this work should reflect the total social productivity of the work. But future taxpayers might not be able to afford it. Yikes yikes, triple yikes. You don't tug on Superman's cape, and you don't welsh on cop retirement pay (isn't that the plot of the first Robocop movie?). So how do we eat that pickle?

Well, a good start would be to reflect for a little while on the underlying exchange made between constituents and the folks laboring on their behalf. The euvoluntary exchange between police and citizen is the provision of law and order, not the banditry of asset forfeiture, not the goonery of no-knock drug raids, not the petty thuggery of stop-and-frisk. The euvoluntary exchange between educator and student is literacy, not teach-to-the-test one-size-fits-all Ritalin-fueled college prep. The euvoluntary exchange between ATF agents and individual is non-existent because the mere existence of drinking statutes contributes to non-salutary campus binge drinking and all the sexual misconduct that entails.

The culture of petty popular tyranny is not free, and the bill will come due once all the Baby Boomers retire to comfort, leaving the burden of their care to a nation weaned on the fiction of government-as-parent. I wonder whether or not it's too late to renegotiate the terms of some of these big ol' service contracts. Pot legalization is a step in the right direction, so let's not hope it's another disappointing case of closing the barn door after the cows have fled.


  1. The idea goes that by shining a light on bad police behavior, cops will stop harassing harmless passersby to focus attention on genuine crime.

  2. I checked the wiki page. While I was there I also looked up Mercantilism, and the following is there:
    One notion mercantilists widely agreed upon was the need for economic oppression of the working population; laborers and farmers were to live at the "margins of subsistence".
    Seems like mercantilist and union members are natural enemies, not natural allies.

    1. The mongoose and the cobra are natural enemies, too.


Do you have suggestions on where we could find more examples of this phenomenon?