The problem with Coase theorem is that it assume’s some general social utility for resource allocation, when it doesn’t really exist.
What exists are tradeoffs.
From the worker point of view, there’s the tradeoff between his gains lending his labor to someone and the alternative uses he could give to his leisure.
From the employer point of view, there’s the tradeoff between the costs of getting more labor from any given worker and the gains such aditional labor would produce.
The settling of such individual tradeoffs will produce the usual labor arrangements we see in the market.
These arrangements can be even things that are not usually considered contracts, like slavery.
If the costs of getting slaves are quite reasonable, and the gains expected are nice, slavery will happen, simply because it’s rational for a potential enslaver to pursue that.
That’s for instance still happens in some places, like in african regions with lot’s of diamonds to be found and avaliable poor people to be enslaved.
Government is not a “solution” though. These concrete costs and benefits are not something that can be simply decreed out of existence.
If these benefits are nice, the guys with the big guns will probably want their share too.
Because “government” is not some outsider force of real life. Government is just a bunch of other players in this real world nasty game of seeking oportunities to survive and trive. Generally speaking, they are the players driving the tanks.
Russians are more anarchic and less respective of authority. Just weeks ago at this Russian-themed blog I visit there were two Russian etatists raging about their countrymen, because there had been this poll and only 50% of Russians said they would report a drunk driver, where the score for Britain and America was 90%. Also they were complaining Russians ‘will not call police if they discover their neighbour doing something illegal or cousin buying a driving licence’.
Also, you are starting off on a very slippery slope with your “improve” assertion. Why stop with employers and employees? Wouldn’t gov intervention “improve” a market outcome by taking ALL of Bill Gates’ money and buying sandwiches for a billion hungry children? Marx is waiting for you on the other side of that tunnel.
JJ, I said it was different because it appeared that the employers were gaining relatively little out of it while the employees were losing out a lot.
This, however, turns out to have been a mistake on my part (a bad shred of neoclassical thinking), due to the reasons I presented in the bargaining case above ^
Furthermore, I forgot for some reason that working conditions are part of compensation. Hence, they work just like any other aspect of the job in negotiation.
I think I will write this up and call it a day soon.
I’m still a little unsure as to the ethics behind the Triangle Shirtwaist factory thing, though. It’s tricky, because it relies on some theory on who carries liability for workplace injuries. To what extent can we say caveat emptor? To what extent is the employer responsible?