ABSTRACT
“Monitoring Labor Standards in a Macroeconomic Context” by Bill Gibson is an innovative discussion of a controversial topic. Gibson weaves together a structuralist macroeconomic framework and a microeconomic optimal control model of pricing and consumer demand, with monitoring of labor conditions added as a new twist. The connection between the macro and the micro is best illustrated by Gibson’s example of an augmented prisoner’s dilemma game. In the game, there are two possible equilibria. In Gibson’s model, a critical variable determining both the degree of monitoring and the effectiveness of policy is the firm’s market share. Consumer markets, including niche markets comprised of socially responsible buyers, and the firms that actually produce goods are not directly linked to one another. An analysis of how endogenous values shape consumer choices and how the institutional dynamics of commodity chains impact key decisions will help define appropriate policy interventions that improve social well-being.
