Monopoly and Labor

Early last year, Bruno Behrend wrote an article on private sector unions. Bruno’s article itself was in reaction to Marc Oestreich‘s “libertarian defense of unions.” Both Bruno and Marc work at The Heartland Institute, which is definitely a testament to Heartland scholars’ freedom of inquiry!

The full discussion is worth reading. Instead of addressing either Bruno’s or Marc’s views in full, I want to take a moment to call out their views on monopolies:

Marc:

So that you all don’t think I’m a total dunce, I want to share one argument against unions that makes me waver. Keeping with theme, I’ll offer an analogy:

If HP, Canon, Lexmark, and Epson CEOs sat around a table tomorrow and decided to set their prices artificially at $500 for a color inkjet printer, would it be legal? The answer is no. This would be collusion. So why isn’t it collusion when sellers of labor get together and set a price? Well, it is and it isn’t. It isn’t because not all laborers join unions. And it is because they do influence prices.

The way I’ve settled this argument internally is by simply deciding that all collusion should be legal.

Bruno:

Now, I don’t know how much that story might be embellished, but I think all of us in public policy — left or right — know that this anecdote is utterly believable. As an youngster, I was flabbergasted. ”People should be paid by the brick, ” I said.

Frankly, had I been raised in a pro-union household, where a more collectivist-minded person raised me to think that we owed “the union” our very livelihood because of paid vacations, 8-hour work days, and the underpinning the whole of western civilization, then I might have a different perspective. But I wasn’t, thankfully.

The fact is that unions exist to (a) withhold labor from the market, for the purposes of (b) extracting the least amount of labor for the most amount of money/benefits. They are essentially monopolists who must first use government to restrict the supply of labor in their favor, so that they can command a higher than market price from the employer.

A monopoly is a firm that enjoys massive economies of scale, is able to earn an economic profit, and is responsible to be both understand its economic position and be empathetic to other stakeholders in the political-economic system. Monopolies can be formed through collusion, or through other means. There is nothing inherently bad about monopolies, and some industries naturally tend towards monopoly.

In the education sector, teachers formed a monopoly that is currently collapsing due to their failure to educate children and their callousness towards employers, state governments, and others.

The leadership role that teachers once had is being split between stakeholders who have suffered under the teachers’ inability to offer a high-quality education. The intellectual leadership position the NEA, AFT, PTA, and others once had is being replaced by the federal-academic complex of scholars, bureaucrats, and scholar-bureaucrats.

Bruno is right that teachers formed a monopoly, and Marc is right that monopolies are not inherently bad.

What is bad is when the monopoly fails to understand its business and fails to understand other stakeholders.

The articles by Bruno and Marc were narrowly targeted to the debate over private-sector unions, but apply very well to the much more important discussion on teachers unions. I enjoyed reading both of their pieces.