UC Berkeley

In debates about the future of work, scholars and policymakers often treat economic efficiency and distributive justice as the principal values at stake. Those who argue for the end of the employment relationship appeal to economic efficiency. They extend law and economics scholar Ronald Coase’s classic theorization of “transaction costs,” arguing that technological innovation has dramatically reduced the transaction costs of economic coordination. As a result, they argue, work today can be more efficiently performed through independent contracting and automation than through the institution of employment. In response, those who defend the legal form of employment invoke distributive justice and equality. They argue that employers should not be able to circumvent the social safety net constructed around employment simply by reorganizing production. Yet, in emphasizing the benefits of that social safety net, rather than benefits inherent to employment as a form of economic production, some concede the potential acceptability of a world without employment—so long as the social safety net lives on independently of it, whether through universal basic income, portable benefits, or other policy innovations.

In this Article, I argue that neither a transaction cost-centric analysis of employment nor one focused only on distributive justice or equality fully conceptualizes all that is at stake in the institutional design and legal regulation of how we work. This is because there are transaction benefits, not just transaction costs, associated with the organization of work. While transaction cost economics has tended to treat the social activity attendant to economic transactions as inherently costly, this social activity can have benefits too. Foremost among these are relational benefits like social trust, belonging, cooperation, and social solidarity, which accrue to individuals, groups, firms, and socio-political systems via economic interaction, coordination, and co-production. And unlike distributive justice, these benefits are inexorably tied to work’s organization; there is no quick and easy substitution for them through redistributive public policy. Transaction benefits arise, or not, at the point of production, from specific organizational forms and institutional practices, and from the legal rules that structure them.

Here, I provide the first in-depth theorization of work as a site of relational transaction benefits, with a specific focus on law’s role in shaping them. In a moment of crisis-level political polarization and social mistrust, we can no longer afford the illusion that work was ever, or should ever be, solely about material production. From Adam Smith to Émile Durkheim, scholars have long insisted that how we work shapes the quality and character of our social solidarity—the extent to which we are, sociologically speaking, a society at all. The future of work will shape the future of our society, whether we plan for it or not. It would be wiser to plan for it by proactively incentivizing the kind of work that produces social connectedness, rather than isolation and fracture. Just as the law has been used to minimize transaction costs, so too can it be used to promote transaction benefits.