ABSTRACT
This chapter discusses an alternative economic analysis of unions and collective bargaining that addresses many of the inadequacies of the monopoly model. By depicting collective bargaining as an indeterminate bargaining problem rather than a demand curve response, people can now take account of the fact that many of the costs of collective bargaining are properly characterized as positional externalities rather than ordinary time and information transaction costs. The optimal public policy with respect to unions and collective bargaining would be for the government to try to maximize the social benefits of employee organization, while minimizing its social costs. The pervasive policy in American labor law of fostering unions and collective bargaining makes sense under this alternative economic analysis. The law on the enforcement of collective bargaining agreements also seems prudent under my alternative economic analysis. The law requires that the parties bargain in good fait concerning wages, hours and other terms and conditions of employment.
