More Alchian & Allen

November 23, 2009

Any one passage from this textbook will be confusing if you don’t have a feel for how they write. So, as a public service, I’m offering up another serving:

It is a tribute to the intelligence and economic acumen of union leaders that they know that the right to strike is crucial to a strong union.  To be effective the strike must, as already emphasized, succeed in preventing other people from competing for the jobs.

When a union prevents nonunion workers from working for less than the wages it seeks, does it differ from the medical profession, which prevents a free market for medical services?  One difference is that the medical profession has more successfully defended its actions, in the name of higher quality of (a smaller quantity of) medical service.  That it also enables doctors to get higher wages is not a difference.  The second difference is that the medical profession does not have to rely on strikes and private intimidation of competitors who would sell their services at lower prices.  Instead it has a licensing law which is enforced by arrest, and possible prosecution, of the competitor.  If laws prohibit the sale of workers’ services by anyone except a “licensed” (union) person, or prohibit training except in approved schools, then the union can keep the supply small and wages higher.  Where the public police force is available, gangsters and hoodlums, the specialists in intimidation, would be of less value.  All union officials would be as free of the “undesirable elements” as are the officers of the medical and legal associations and public utilities, to name only a few closed monopolies. [p. 332]

The theme of the two passages I’ve quoted so far is a Chomskian one that Thomas ought to love. Every law has some reasonable argument in its favor, but often these rationales mask the fact that they are there to serve the interests of a powerful elite! Down with the legal fiction that is the corporate form! To each according to his needs!

Lest you think I’m attacking a straw man, observe the response when you suggest to the average person that the FDA be abolished.

BTW, I really like that line about “specialists in intimidation.”


One Response to “More Alchian & Allen”

  1. Thomas Says:

    Yeah, I won’t lie — I do like this theme. It feels unnatural for me to comment on this blog without registering some sort of objection! But yeah, I really don’t have one…

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