The adjudication of labor disputes as a private good

Abstract

In their seminal article “Adjudication as a Private Good,” William Landes and Richard Posner’ question whether a system of private courts would be superior to a system of public courts. In their analysis they do not distinguish among courts by function. Instead, they implicitly include together courts that hear issues as disparate as contract disputes, criminal prosecutions, and labor arbitrations. It is my contention that the relative desirability of public and private courts may be influenced by the roles that those courts are intended to play. Accordingly, in this paper I propose to extend the Landes-Posner analysis by analyzing the publicprivate distinction within the context of a single type of court. The “courts” that I have chosen for this analysis are those that hear disputes between management and labor concerning the creation-“interest disputes”and interpretation-“grievance disputes”-of labor contracts.2 Labor disputes are particularly suited to this inquiry because a sizeable empirical literature is available concerning the operations of both private and public arbitration systems. This article is divided into four sections. In the first I identify reasons why parties to a labor dispute might employ an arbitrator and goals that those parties wish the arbitration process to achieve. The second section provides a theoretical analysis of the functioning of publicly and privately supplied arbitration services. In the third section a number of hypotheses concerning public versus private arbitration are constructed and tested against available empirical evidence. Finally, the fourth section offers a brief discussion of three alternative types of public arbitration systems.