Who’d a-Thunk It?

by Don Boudreaux on August 5, 2016

in Hubris and humility, Nanny State, Reality Is Not Optional, Regulation, Seen and Unseen, Work

Mandated family leave and other ‘benefits’ for workers have ill consequences that offset – and, likely, more than offset – for workers the mandated benefits.  (HT Cyril Morong)


Once again, contract terms are not arbitrary.  Even if party A has a stronger bargaining position than does party B, as long as party B is not forced to contract with party A, any contract between party A and party B will be mutually advantageous.

Further, no third party knows enough to intervene into this contract in order to arbitrarily change the terms in ways that make party B better off.  Because in all real-world exchange relationships the number of different margins along which contracts are made is large, when a third-party arbitrarily changes one term of the contract – say, giving party B paid family leave – party A and party B have incentives to change some other contract term or terms to offset the change in the first contract term.  And because this new set of contract terms was available to A and B before the forced change, we can conclude that the new set of contract terms is not as mutually beneficial as was the first set – and also that this new set of contract terms might well be less attractive even to party B than was the first, now illegal set of terms.  It is indisputably and outrageously arrogant for a third party to conclude that party B’s well-being is improved now that B has a greater benefit on margin L (an increase in that benefit forced by the state) even though B’s benefits on margins W and T worsen as a consequence.


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