The Organization of Labor: Central Issues

A central thesis of this book is that a common theory of contract applies to transactions of all types—labor market transactions included. The organization of labor is nevertheless a very complicated matter. No single approach to the study of labor organization is at present adequate—which is to say that the study of these matters is usefully informed from several points of view.1 Transaction cost economics focuses on efficiency aspects. Among the areas in which potential benefits might be realized through collective organization are wage and benefit determination; the enhancement of productivity through human asset development; dispute settlement; efficacious adaptation; and regard for dignity.

A discriminating approach to labor organization will recognize that the magnitudes of those benefits vary with the circumstances. One of the purposes of this chapter is to ascertain how the potential gains vary. That leads to two related questions: What are the governance structure needs of different transactions? What are the ramifications for union organization? In addition to the benefits, the potential hazards of collective organization have to be considered. Those are briefly assessed as well.

Source: Williamson Oliver E. (1998), The Economic Institutions of Capitalism, Free Press; Illustrated edition.

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