Collective Bargaining and Economic Theory

Abstract

The shift from individual to is often thought to be the most outstanding social phenomenon of the last decades in all countries where a relatively free market has survived. While the phrase collective bargaining originated and has been most sharply defined in the labor market, group-organized direction of business activities can be observed in many other fields. Agricultural cooperatives have established collectively bargained prices for the commodities marketed by their members. A great amount also of large-scale buying and selling among manufacturers or between them and organized retailers has many of the essential characteristics of bargaining. In the field of international economic relations the negotiation of bilateral or multilateral agreements has been the rule and free trade the exception. The process derives its significance from its setting in the larger problem of organized groups within society. Its analysis, therefore, presents special difficulties to economic theory which has developed the tools of demand and supply functions under the simplifying assumptions of perfect competition in a monistic market. Where individuals have pooled their interests in a few powerful groups the appearance of atomistic competition has given way to organized group action, and the traditional assumptions of a free exchange economy prove of little empirical usefulness. Classical and neoclassical economists believed that the struggle of many selfish interests would turn private vices into public benefits. But where the many have been replaced by a few powerful interest groups the market may become the scene of an irrepressible conflict, which economics is unable to deal with, even in theory,' and individual efforts to enhance market opportunities through group association appear to threaten the very existence of competitive norms.2 This paper will attempt to explore some of the theoretical issues raised by the growth of bargaining, with emphasis placed on the broader implications of for the general drift of economic speculation rather than the formal aspects of bilateral monopoly.3