Economics Dictionary of ArgumentsHome
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| Bargaining: In economics, bargaining refers to the process of negotiation between two or more parties to reach a mutually beneficial agreement, often involving the division of resources, setting prices, or determining terms of trade. It plays a key role in markets, labor relations, and contracts, influencing efficiency and distribution outcomes. See also Markets, Actions, Decisions._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Murray N. Rothbard on Bargaining - Dictionary of Arguments
Rothbard III 363 Bargining/Rothbard: (…) [in] the theory of bargaining [,] [w]e are in a very analogous situation to the two-person barter (…). For what we have is not relatively determinate prices, or proportions, but exchange ratios with wide zones between the “marginal pairs” of prices. The maximum price of one is widely separated from the minimum price of the other. >Price, >Costs, >Costs of production, >Opportunity cost. What the final decision will be cannot be indicated by praxeology. >Praxeology/Rothbard. There is, for all practical purposes, no theory of bargaining; all that can be said is that since the owner of each factor wants to participate and earn some income, all will most likely arrive at some sort of voluntary contractual arrangement. >Factors of production/Rothbard. This will be a formal type of partnership agreement if the factors jointly own the product; or it will be the implicit result if a pure capitalist purchases the services of the factors. Economists have always been very unhappy about bargaining situations of this kind, since economic analysis is estopped from saying anything more of note. We must not pursue the temptation, however, to condemn such situations as in some way “exploitative” or bad, and thereby convert barrenness for economic analysis into tragedy for the economy. Whatever agreement is arrived at by the various individuals will be beneficial to every one of them; otherwise, he would not have so agreed.(1) Factors of production/Rothbard: It is generally assumed that, in the jockeying for proportionate shares, labor factors have less “bargaining power” than land factors. The only meaning that can be seen in the term “bargaining power” here is that some factor-owners might have minimum reservation prices for their factors, below which they would not be entered in production. In that case, these factors would at least have to receive the minimum, while factors with no minimum, with no reservation price, would work even at an income of only slightly more than zero. Now it should be evident that the owner of every labor factor has some minimum selling price, a price below which he will not work. >Production/Rothbard, >Production theory/Rothbard, >Production costs/Rothbard. Labor/Rothbard: In the real world, labor, (…) is uniquely the nonspecific factor, so that the theory of bargaining could never apply to labor incomes.(2) Rothbard III 365 Not only is bargaining theory rarely applicable in the real world, but zones of indeterminacy between valuations, and therefore zones of indeterminacy in pricing, tend to dwindle radically in importance as the economy evolves from barter to an advanced monetary economy. The greater the number and variety of goods available, and the greater the number of people with differing valuations, the more negligible will zones of indeterminacy become.(3) 1. Little of value has been said about bargaining since Böhm-Bawerk. See Böhm-Bawerk, Positive Theory of Capital, pp. 198–99. This can be seen in J. Pen’s “A General Theory of Bargaining,” American Economic Review March, 1952, pp. 24 ff. Pen’s own theory is of little worth because it rests explicitly on an assumption of the measurability of utility. Ibid., p. 34 n. 2. Contrast the discussion in most textbooks, where bargaining occupies an important place in explanation of market pricing only in the discussion of labor incomes. 3. Any zone of indeterminacy in pricing must consist of the coincidence of an absolutely vertical supply curve with an absolutely vertical market demand curve for the good or service, so that the equilibrium price is in a zone rather than at a point. As Hutt states, “It depends entirely upon the fortuitous coincidence of . . . an unusual and highly improbable demand curve with an absolutely rigid supply curve.” W.H. Hutt, The Theory of Collective Bargaining (Glencoe, Ill.: The Free Press, 1954), pp. 90, and 79 - 109._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
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> Counter arguments against Rothbard
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