Labor Law, Ownership, and the Firm

Labor law has its own working theory of the business firm, not derivable from another area of law. This theory of the firm, which the affirmative provisions of labor law are taken to both modify and preserve, is more overtly hierarchical than in other areas. This is true across the main functional domains of labor law: union formation; expressive and associational rights; and the scope of collective bargaining. A rich vein of existing scholarship deals with both hierarchy and deference to property within labor law. The arguments of this essay emerge from considering these aspects of labor law in conjunction with broader ideas about the firm. The essay shows that labor law\u27s theory of the firm does not follow straightforwardly from generally accepted ideas about corporate property and is in fact in tension with them. It also sets out how the coordination rights granted to workers by labor law are systematically inferior in quality to the analogous rights granted by incorporation, as well as being derivative of firm-based economic coordination more generally. Finally, the essay briefly revisits the ur-text of modern corporate governance, authored by New Deal liberals Adolf Berle and Gardiner Means, and surfaces the implicit premises about labor relations contained therein. Specifically, Berle and Means read a similarly hierachical picture of the work relationship (an unrealistic one) into the historical snapshot of the firm and of property relations that effectively serves as the normative benchmark for their affirmative view. This ultimately functioned to narrow questions of enterprise governance to largely exclude workers, setting the stage for later developments that would do so even more explicitly, while questions of workers\u27 role in the enterprise were now cordoned-off within labor law

The First New Deal: Planning, Market Coordination, and the National Industrial Recovery Act of 1933

In 1933, four years into the Great Depression, Congress enacted the National Industrial Recovery Act (NIRA) in close cooperation with the Roosevelt administration. The central action of the statute was to facilitate price coordination across a given market or industry. Its rationale was to contain the destructive competition and below-cost pricing that were exacerbating the problems already roiling the economy as a result of the initial stock market crash, and subsequent cascading credit and liquidity crises. In addition to addressing the credit crisis directly through banking and monetary reform, the Roosevelt administration thus sought to buoy up purchasing power by stabilizing prices. NIRA also systematized and federalized the existing patchwork of legal support for collective bargaining between workers and business firms, in an effort to stimulate and stabilize wages. The idea of boosting demand and ultimately production through a floor on wages was not new; it had had currency for decades thanks to the influence of institutionalist economists, policymakers, and many business leaders. Still, NIRA at that time represented the most ambitious and broad-ranging effort to put that idea into practice. In discussions of economic law and policy today, the “First New Deal” is understood as a major experiment in “planning” that displaced “markets.” This characterization is broadly endorsed by mainstream antitrusters, legal progressives, socialists, and most others too. Beyond that point of convergence, the normative valence attached to each—as well as the political meaning of “planning” within a broader political project—diverges, with some endorsing “markets” over “planning” or vice versa, and with some seeing “planning” as key to a broad emancipatory project, and others seeing it as simply a backstop for the continuation of a fundamentally inegalitarian economic system. What these often bitterly divergent viewpoints have in common, though, is a failure to grasp just how intrinsic the activity of economic planning is to markets themselves. This is not in the mere sense of bare-bones public and legal market management mechanisms (such as contracts and property law), though indeed those mechanisms frequently enable significant degrees of economic planning that obviously displace competition (think for example of long-term output or requirements contracts). In Patrick Atiyah’s magisterial history of English contract law, he suggested that a major reason for the rise of contract law in the nineteenth century, and specifically for the modern emphasis on the will of the parties and on expectation damages, was that the legal form facilitated economic planning—and economic planning was necessary for the growth of markets and capitalism

Charting the Reform Path

A Review of Inequality and the Labor Market: The Case for Greater Competition. Edited by Sharon Block and Benjamin H. Harris

On Firms

This paper is about firms as an instance of economic coordination, and about how we think about them in relation to other forms of coordination as well as in relation to competition and markets. The dominant frame for thinking about firms--which has strongly influenced contemporary competition law as well as serving as a vital adjunct to the fundamental concepts of neoclassical price theory that guide many areas of law and policy--implicitly or explicitly explains and justifies the centralization of both decision-making rights and flows of income from economic activity on productive efficiency grounds. We have very good reasons to doubt this approach as explanation, because power perpetuation by incumbent control groups is often a better explanation for such centralization (of coordination rights and income flows) than productive efficiency. We should also be skeptical of the approach as justification because it often either takes as given, or assumes away, contested legal rules that also affect productive efficiency outcomes; because the conception of productive efficiency it uses is impoverished; and because the nature of competition and markets themselves give us no good reasons to limit the normative bases for our legal choices about economic coordination to productive efficiency alone

The Enduring Ambiguities of Antitrust Liability for Worker Collective Action

This Article examines the regulation, by antitrust law, of collective action by low-wage workers who are classified as independent contractors, and who therefore presumptively do not receive the benefit of the labor exemption from antitrust law. Such workers find themselves in the position of most workers prior to the New Deal: at once lacking labor protections, yet exposed to antitrust liability for organizing to improve their conditions. I argue that this default rule is the legacy of a problematic history that is taken for granted by the contemporary antitrust framework. In Part I, I show that the threat of antitrust liability is a powerful constraint upon contemporary independent contractor workers’ own ability to take action to address their working conditions. In Part II, I trace the application of antitrust liability to worker collective action to the time before the labor exemption, arguing that pre-New Deal courts imported fundamentally hierarchical and coercive tenets from the common-law tradition into the fledgling antitrust law in order to apply it to contain worker organizing, thereby creating tensions with their own freedom of contract principles. In Part III, I show how the legal framework of the labor exemption reinforced the underlying assumption that antitrust regulates worker collective action, even as it immunized most workers from such liability (so long as they continued to be considered employees). In Part IV, I argue that the modern framework for antitrust does not compel the continued application of this default rule, and indeed supplies materials for a fresh, more balanced reconsideration of it. Ultimately, the situation of these workers is a test of what antitrust fundamentally says about labor, absent a specific exemption. Because that exemption is currently rooted in the New Deal network of labor regulation, antitrust’s treatment of labor becomes a baseline for critical conversations about how to reform our current framework of labor regulation—in the same way that it was the baseline for those conversations prior to the New Deal itself. In particular, antitrust functions as an outer limit for any such reform, and also for specific policy proposals to address the increasing prevalence of working relationships outside the bounds of employment

Kinetic Exchange Models of Income and Wealth Distribution: Self Organization and Poverty Level

In this invited book chapter, we draw the reader to a brief review of the different Kinetic Exchange Models (KEMs) that have gradually developed for markets and how they can be employed to quantitatively study inequalities (the Gini Index and the Kolkata Index) that pervade real economies. Since a many-body economical market can be studied using tested laws of physics, these models have the freedom to incorporate provisions like inclusion of individual saving behaviors while trading and rendering these saving behaviors to be time-independent and time-dependent respectively. This is to observe when and how the well known exponential distribution for no-saving gives rise to a distribution with a most probable income. A review of the earlier cases along with their implementation with a bias, where the population in the low-income bracket of the society is favored by selecting one of the traders in the trading process to be the poorest of all, follows. The biased selection of agents ultimately giving rise to self-organizing features in the money distribution has also been reviewed in detail, using the behavior of the Self-Organized Poverty Level. In the end, we elucidate the recent endeavors of the KEMs in finding answers to the growing condensation of wealth in the hands of a countable few rich people and providing probable solutions that can curb further expansion of oligarchic societies.Comment: Invited chapter for a book on Econophysics (Ed. Prof. Amit Sinha), to be published by De Gruyter (15 pages, 6 figures