Labor Cases
Labour law is commonly, but incorrectly, interpreted as the legislation that governs a specific type of relationship, specifically the relationship of (subordinate) employment. Such an approach produces insurmountable definitional challenges, promotes strategic manipulation, and threatens field obsolescence. Instead, labour law should be regarded as a set of procedures and practises for intervening in specific types of markets, notably markets that will produce suboptimal results if such interventions are not used because individuated actors cannot overcome collective action issues. While legal systems differ in their approaches and practises, they often feature instruments for allowing collective actors to negotiate and agree; specific institutions to foster informal and formal bargaining and conflict resolution; and legally-set minimum terms. While these practises were initially created to intervene in labour markets, their worth is not restricted to such markets and they may be useful in others.
Typical Situations That May Require the Use of Labour Law
- Supply inelasticity;
- Collective action problems;
- Low trust and opportunism that prevent the formation of efficient long-term contracts;
- Insufficient incentives for human capital investment;
- Information asymmetries;
- Monopsonistic buyers;
- Bilateral monopolies;
- Cognitive Disabilities caused by individuals’ use of decisional heuristics or other rational refusals to invest in information. Deciding whether physicians, for example, should be able to use labour law to form unions to negotiate with health insurance companies necessitates economic analysis of these market failures (if any), rather than the similarities and differences of the underlying relationship to 18th century employment.