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Wednesday, November 21, 2012

Marx vs Coase

Long drive ahead of me today, and I'm late getting on the road, so just a few quick ones for now. This is from Chris Dillow:

Marx vs Coase: experimental evidence, Stumbling and Mumbling: Are firms efficient institutions for responding to uncertainty, as Coase thought? Or are they, as Marxists believe, means whereby capitalists exploit workers? A new paper by Ernst Fehr and colleagues provides experimental evidence. ...
Fehr and colleagues found that, in one-shot encounters where employment contracts were struck, 51% of principals exploited agents. "The Marxian idea that power can be used for exploitation is real" they conclude. ...
However, in repeated encounters, the prevalence of exploitation dropped to 21%. This is because employers wanted to build a reputation for fairness which they could use to encourage workers to stick to employment contracts.
Simple as it is, this gives us a framework to pose the question: under what conditions are we likely to have Coasian rather than Marxian firms?
One is where there's a strong norm of fairness. ... Another is where firms have a desire for a reputation as a "good" employer. This is more likely to be the case under conditions of near-full employment, where they have to compete for for workers.
A third is the existence of strong unions. ... This corroborates my suspicion that strong unions can be good for an economy.
There is, however, a fourth possibility - for workers to have an outside option such as welfare benefits that allow them to reject exploitative contracts.
The fact that many of capitalism's supporters reject this fourth course makes me suspect that what they are interested in is not so much efficient Coasian firms as the power of capital to exploit workers.

    Posted by on Wednesday, November 21, 2012 at 09:43 AM in Economics | Permalink  Comments (86)


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