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This article is a "practitioner& #39;s guide to noncompete use", but it makes a great point about something that& #39;s bothered me for a while about how economists view employment contracts, versus what happens in the real world. Quick thread: 1/7 https://www.jdsupra.com/legalnews/do-you-really-need-a-non-compete-for-51030/">https://www.jdsupra.com/legalnews...
Lots of econ literature explicitly or implicitly assumes that contracts are negotiated, and people are (to some extent) compensated for what they sign. The same lit assumes that companies use contracts when they hold positive value, but not otherwise. 2/7
Any lawyer who& #39;s written a company& #39;s employment contract can tell you this is garbage. Companies don& #39;t want to modify their contracts on a case-by-case basis! So they just throw the same one (probably recycled by outside counsel from the last time they did this) at everyone. 3/7
It doesn& #39;t matter if you& #39;re a middle manager, a janitor (if you& #39;re lucky enough to be *employed* by the company where you spend your time), a programmer, etc... you get the same contract, because the higher-ups don& #39;t want to have to get into the weeds with every worker. 4/7
So what& #39;s the take-home? Companies& #39; lawyers put together complex and long contracts that include contingencies and provisions for every worker in the organization, top to bottom. 5/7
Nobody reads the whole thing because they don& #39;t see it as being worth their time, and so nobody negotiates over the terms in the contract. The idea of efficient Nash bargaining dividing a jointly-optimal level of surplus is out the window. 6/7
And we& #39;re left with receptionists with noncompetes, companies top-to-bottom with class action waivers and mandatory arbitration clauses, and not a shred of "efficiency" in sight! 7/7
