Abstract
Friedrich A. Hayek thoroughly criticizes labor unions in Sect. 18 of The Constitution of Liberty published in 1960 and insists in the same section that closed-shop contracts should be illegal. He also views yellow-dog contracts, which were designed as countermeasures against the labor unions, as illegal. However, it has been pointed out that, according to Hayek’s social philosophy, neither the closed-shop contract nor the yellow-dog contract should be seen as legal issues, as they are based on free will between the parties and have no compulsory elements. The key to solving this dilemma is in understanding how Hayek views the core concepts of the U.S. Antitrust Law, namely, restraint of trade and monopoly. The aim of this article is to examine the theoretical structure of Hayek’s arguments on those types of contracts, freedom and coercion, the ‘restraint of trade’ doctrine, and the rule of law. It addresses the important common law issues of freedom, coercion, monopoly, restraint of trade, and the rule of law.
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Notes
In addition to the references mentioned in the following notes, for example, Bogg (2009) analytically compares the Hayekian approach to labor unions with that of other liberal thinkers, such as Nozick.
From the same point of view, Jackson states:
Hayek’s concern about the coercion wielded by the state and trade unions was never matched by concern about the coercion that might occur in employment relations. This was because he found it difficult to conceive of employment in a market economy as coercive. Employees, Hayek believed, were not coerced by employers in a market system, because they always enjoyed the option of seeking alternative employment (Jackson, 2015, p. 172).
Charles Baird describes Hayek’s argument as “a bit of logical trouble” in his thinking (Baird, 2007, p. 42) and states:
He was so adamantly opposed to the closed shop as it evolved under the unions’ illegitimate privileges and immunities granted by the Trades Disputes Act in Britain and the National Labor Relations Act in the U.S. that he failed to recognize that closed shop agreements between a truly voluntary union and a willing employer would be consistent with true freedom of association (Baird, 2007, p. 42).
Therefore, the author believes that this article can provide some valuable basic insights regarding the antitrust law and policy. Hayek’s thinking on the antitrust law and policy provides an alternative to the Chicago School’s way of thinking, which, it is well known, has been criticized by Khan (2017).
Although Hayek’s consideration of labor unions in The Constitution of Liberty mainly covers the early twentieth century up to the 1940s, the environment surrounding labor unions has changed greatly since then. It should be noted that the argument presented in The Constitution of Liberty applies at least to some part of the history of labor unions, but it is not appropriate to apply these considerations to their entire postwar history. Kolev (2021) provides a suggestive depiction of Hayek’s arguments, which are based mainly on prewar history, but whose validity is limited by various changes in postwar history.
Quoting Justice Jackson’s dissenting opinion in Hunt v. Crumboch.
Hayek uses strong terms such as “unlimited pressure,” “command,” and “power” in the context of using the word “coercion” in relation to labor unions (Hayek, 1960, p. 270). It is reasonable to conclude that such strong terms are compatible with Hayek’s concept of coercion. The word “domination” is used in a similar way in this study.
Hayek, who sees the denial of coercion by private actors, including labor unions, as an important condition of the free market, accepts the monopoly of coercion by the state to define private spheres of free activities. Restraining state coercion through known general rules minimizes its effect and makes it as innocuous as possible (Hayek, 1960, p. 21). Acceptance of coercion by private groups, including labor unions, undermines this monopoly.
Hayek shows that one of the economic consequences of labor unions is that they distort the system of relative prices and wages that adjust the balance between the supply and demand of labor (Hayek, 1975, p. 19), while he also points out (Hayek, 1960, p. 276) that collective bargaining can help adjust the terms and conditions for more productive workers. As pointed out elsewhere, it is important for labor unions to remain open to competition. That is why the application of the restraint of trade doctrine is one of Hayek’s central concerns.
The doctrine of prohibition of restraint of trade, grounded in an understanding of competition as a knowledge discovery procedure, has been inherited by leading German competition law scholars such as Erich Hoppmann and Ernst-Joachim Mestmäcker. See, for example, Hoppmann (1988), Mestmäcker (2005), and Mestmäcker (2008). See also Vanberg (2011) for the development of competition law theories in the EU, especially in Germany.
About a quarter of a century ago, Richard Epstein stated that the New Deal legislation in relation to workers and unions “is in large measure a mistake that, if possible, should be scrapped in favor of the adoption of a sensible common law regime relying heavily upon tort and contract law” (Epstein, 1983, p. 1357). A quarter of a century before Epstein’s statement, Hayek warned of immunity from common law discipline regarding workers and unions.
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Legislations
The Clayton Act. Pub. L. 63–212, 38 Stat. 730 (1914), codified as amended at 15 USC §12 et seq. and 29 USC §52, et seq.
The Landrum–Griffin Act. Pub. L. 86–257, 73 Stat. 519 (1959), codified as amended in scattered sections of 29 USC.
The Norris–La Guardia Act. Pub. L. No. 72–65, 47 Stat. 70 (1932), codified as amended at 29 USC §101 et. seq.
The Sherman Act. 26 Stat. 209 (1890), codified as amended at 15 USC §1, et seq.
The Taft–Hartley Act (The Labor Management Relations Act). 1947, Pub. L. No. 101, 61 Stat. 136 (1947), codified as amended in scattered sections of 29 USC.
The Wagner Act (The National Labor Relations Act). Pub. L. No. 198, 49 Stat. 449 (1935), codified as amended at 29 USC §151, et seq.
Cases
Abood v. Detroit Board of Education, 431 U.S. 209 (1977).
Adair v. United States, 208 U.S. 161 (1908).
Commonwealth v. Hunt, 45 Mass. 111 (1842).
Coppage v. Kansas, 236 U.S. 1 (1915).
Duplex Printing Press Co. v. Deering, 254 U.S. 443 (1921).
Hunt v. Crumboch, 325 U.S. 821 (1945).
Janus v. American Federation of State, County, and Municipal Employees, Council 31, 138 S. Ct. 2448 (2018).
Lochner v. New York, 198 U.S. 45 (1905).
Loewe v. Lawlor (Danbury Hatters' Case), 208 U.S. 274 (1908).
The Philadelphia Cordwainers’ Case (Commonwealth v. Pullis), 3 Doc. Hist. 59 (1806).
Acknowledgements
The author thanks Geoff Whyte, MBA, from Edanz (https://jp.edanz.com/ac) for editing a draft of this manuscript.
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Kusunoki, S. Hayek on labor unions and restraint of trade. Const Polit Econ 34, 598–612 (2023). https://doi.org/10.1007/s10602-023-09396-y
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DOI: https://doi.org/10.1007/s10602-023-09396-y