Coercion and Bargaining Power
Political Economy
Disclaimer: So far as I know Hayek has never actually coerced a kitten.

Coercion and Bargaining Power

The idea of coercion is central to many strands of Libertarian thought, held up as the summum malum and opposed to voluntarism. But to actually define coercion precisely enough to build a political theory on it is a bit trickier. In general, definitions can be grouped into two broad categories: rights-based, and rights-prior.

1) Rights-based definitions

One starts with a series of rights, and defines coercion as the violation of these. Such a definition, however, just shifts the problem to the definition or delineation of rights. Natural rights don’t stop the buck; their assertion must be backed up with a further “why”. Nor is the distinction between positive and negative rights viable as anything but a rule of thumb.

The problem may be solved by the empirical (or evolutionary) natural rights approach, in which rights evolve through institutional selection toward the best bundle. Doing so obviates many classic moral dilemmas. This evolutionary process is in fact thwarted by the kind of rationalistic philosophizing used in traditional rights theories: to derive and institute a set of rights from pure reason is to ignore and discount any institutional memory which doesn’t by chance leak into the theory. The consistent application of a rationally derived ethical theory to edge cases1 is distasteful to accept, and awkward to explain away. The margin at which any ethical principle becomes inappropriate is a question only such a process can settle, suggesting that such ethical theories are not axiomatic and cannot be derived from pure reason.

If, therefore, rights are defined or found to include life, liberty, and property, then coercion is identified with aggression, and comports with the classic Libertarian treatment. If (according to the various theories of rights, respectively) reason were to show or institutions prevailed in which employment were a right, then to threaten termination would be coercion as well. And in Finland, the threat to terminate internet service would count too. In short, the concept of coercion is exactly as clear cut as the theory of rights behind it.

2) Rights-prior definitions

Alternatively coercion can be defined as a thing-in-itself, without reference to rights. This was Hayek’s opinion:

[W]e are tempted to define “coercion” by the use of such terms as “the interference with legitimate expectations,” or “infringement of rights,” or “arbitrary interference”. But in defining coercion we cannot take for granted the arrangements intended to prevent it. . . . Coercion not only would exist, but would be much more common if no such protected sphere existed [i.e. if there were no rights]. Only in a society that has already attempted to prevent coercion by some demarcation of a protected sphere can a concept like “arbitrary interference” have any meaning.

Hayek, F.A. The Constitution of Liberty (1960), p. 139.

Hayek identifies “arbitrary interference” as a rights-based criterion, but maintains the concept of coercion itself as something independent of rights and institutions. But an independent definition comes at the cost of clear line between “coercion” and “not coercion”. Notwithstanding the (not unproblematic2) examples earlier in the chapter which read as an attempt to draw such a line,3 Hayek admits that “coercion is, in the last resort, a matter of degree” (p. 146). Any definition independent of a clear-cut series of rights permits only that more or less severe coercion be spoken of.

Hayek’s own definition, being subjected to the arbitrary will of another, is problematic for Libertarian theory. Many things subject us to the arbitrary will of another which a rights theorist would not consider coercive. The threat of termination is real and great enough that the employee is generally pliable under the direction of his superior, even to be directed to do specific things – something Hayek indicates as a sine qua non of coercion.4 The employer need not be a monopsonist to exercise a great deal of control this way. And given his admission that a monopolist of necessities may be coercive (see footnote 2), it would be inconsistent to call the threat of termination noncoercive.

Indeed, from the perspective of the employee, his situation vis-a-vis his employer is not much different than his position vis-a-vis the government. Yes, one can find another employer, but one can also leave the country. The fact that the latter is usually much more difficult only shows again that the difference is one of degree, not of kind.

Without a basis in rights, coercion’s opposite – voluntariness – must likewise be a matter of degree. Hayek distinguishes the case where “my handed is guided by physical force to trace my signature” (p. 133), from “coercion proper” by the fact that one has not acted, but treats the cases essentially the same. It would perhaps be more apt to call this perfect coercion, in that all options but one have been removed from the array of choices. Further down the scale are situations he calls the more severe forms of coercion – the threat of physical force. “While we may pity the weak or the very sensitive person whom a mere frown may “compel” to do what he would not do otherwise, we are concerned with coercion that is likely to affect the normal, average person” (p. 138). And below his threshold of relevance to policy lie voluntarily entered coercion: “A morose husband, a nagging wife, or a hysterical mother may make life intolerable unless their every mood is obeyed. But here society can do little to protect the individual beyond making such associations with others truly voluntary.”

But as we have seen, “voluntary” must be as much a matter of degree as coercion. If there is no “true coercion”, then there is nothing “truly voluntary”. We are all forced to a greater or lesser extent to adapt our actions to the outside world. In another work Hayek (1968) even speaks of the “impersonal coercion” of the market. His argument appears to be that a line is impossible to draw, but we have to draw one somewhere.

A Power Analysis Reconstruction

Perhaps the impossibility indicates instead that the justification for liberty must rest on a more solid foundation than its juxtaposition against coercion. Rather than using a natural-rights term to mean something else, Hayek’s case would be better made with a tool borrowed from the Left: power analysis, looking at the surplus accruing to each party in a trade in order to discern a bargaining power disparity.

Using this framework, let us contrast a vendor selling bottled water to dying millionaires in the desert, with a mugger demanding cash from passers-by at gunpoint. To the rights-theorist, these situations are clearly distinct. However, if we identify coercion with bargaining advantage, the situations look exactly the same: “your money or your life.” If, as is usually the case, we decide between these frameworks with an eye to deciding whether or not to prohibit the former situation, we will prove to much.5 We may admit there is a relevant sense in which the situations are the same, and another sense in which they are different. Having broken down the line between them, we can rebuild it on the principle of a single “right”: nonassociation.

The force of a right to nonassociation is in its “defaultness”; an unambiguous declaration of the of the natural state of things, ensuring that voluntariness indicates the expectation of at lease some mutual benefit. In this sense it might be called a “natural right”: not that it is natural to have no associations, but that the natural relationship between any one person and any other particular person is one of nonassociation. In general, we can blame a man for his associations, but not for his lack of associations. There is no general duty to go into the desert and save dying wanderers.

Thus we must conclude – paradoxically, if exploitation is to be considered wrong in itself – that even if we can censure the vendor for exploiting the wanderer, we cannot censure him for not going into the desert. This is in contrast to the mugger scenario, where an exchange is forced upon an unwilling party: here, both options are exploitative, whereas in the desert scenario one option was exploitative and the other nonassociative – even if both options in both scenarios are negative. Certainly the mugging victim would be better off with nonassociation (an option taken away from him), but it is difficult to see how the wanderer is not better off being given the option to trade a fortune for his life. He is at least no worse off than nonassociation would have left him.

Thus we admit the existence and relevance of both exploitation and coercion, while yet maintaining a distinction between the two. Coercion is binary; exploitativeness is continuous: it is easier (perhaps deceptively so) to judge a situation “coercive” or “noncoercive” than “exploitative” or “nonexploitative”. Further, exploitation is a superset of coercion. All coercive situations involve a highly unequal bargain, as force does not need to be threatened unless one party stands to lose value. A situation becomes more exploitative the less value one party gains from a trade. The line into coercion is where that value becomes negative; where the threat of nonassociation is insufficient to induce cooperation.

Exploitation can, however, look very similar to coercion. The naturalness of nonassociation is not absolute; it is probabilistic. It applies most forcefully to large societies, with many formal relationships, where the options for association are many. Tribal arrangements on the other hand, or more generally informal arrangements, increase the likelihood that a particular relationship will become necessary. Thus situations do arise, both naturally and as a systemic result of coercion, in which people come to depend on the benefits of association with one or several other particular people. This arrangement – dependence – then becomes the new default, from which vantage point nonassociation looks like the sort of active harm (rather than simply a failure to benefit) that is characteristic of coercion.

The distastefulness of exploitation must not therefore be dealt with ex post, but ex ante. It may be the case that most exploitation is evidence of previous coercion – a point obscured by the desert vendor example, which treats the situation simply as given. The left-libertarian might point to government mismanagement of the money supply, fueling the boom-and-bust cycle which creates perpetual unemployment, thus increasing the bargaining advantage of employers (at least those that survive the bust) over employees.6 He might point to any number of risk-subsidies or barriers to entry that impede the competition of capital. He might also overstate these effects on the bargaining dynamic. Surely the vast majority of the dependence and exploitation we see today is a result of privilege granted by force of government, whether directly (welfare) or indirectly (through influence on bargaining power). Nevertheless, if to remove all this does not indeed eliminate dependence, or if different forms of dependence should arise (as is likely), this simply means that a free society depends on its culture beyond the extent to which its institutions shape it.

Distinguishing exploitation from coercion gives us both the descriptive usefulness of Hayek’s conception, and the logical precision of a rights-based conception. It is misleading to rail against coercion as the archetypical social evil, as Mill did in On Liberty, and as Hayek does in The Constitution of Liberty. Mill saw by an implicit power analysis that social opprobrium is not essentially different from coercion by force. Hayek saw that the obliteration of this distinction inevitably led to the centralization and expansion of coercion to prevent the smaller forms. But neither was willing to draw a line. Mill indeed proves far too much, for coercion in his sense exists everywhere we are required to adjust our actions to the existence of others. Economics should teach us, therefore, to look for an optimum at the margin, and to seek institutions which may approximate that optimum through spontaneous processes. A categorical opposition to coercion is ultimately a poor foundation for a political philosophy.


  1. The classic example for the non-aggression principle is the misanthrope whose genome fortuitously contains the cure for cancer. Unfortunately he will not part with a single hair for any price, and it would violate the non-aggression principle to retrieve it against his will.
  2. For example, in the discussion of resource control (Ibid., pp. 135f), any line between the “coercive” water monopolist and the “noncoercive” portrait monopolist must be arbitrary. Necessity is relative.
  3. For example immediately prior to the initial discussion of the coercive monopolist he says “Coercion should be carefully distinguished from the conditions or terms on which our fellow men are willing to render us specific services or benefits,” as if there were indeed a clear categorical line (Ibid., p. 135). Later he speaks of “true coercion” (p. 137) implying the same thing.
  4. “So long as the act that has placed me in my predicament is not aimed at making me do or not do specific things, so long as the intent of the act that harms me is not to make me serve another person’s ends, its effect on my freedom is not different from that of any natural calamity.” (Ibid., p. 137) The employer-employee relationship would appear to satisfy both these conditions of coercion.
  5. Hayek (rightly) accuses John Stuart Mill of “overstat[ing] the case for liberty” in On Liberty (The Constitution of Liberty, p. 146). Hayek does the same, however, though for the opposite reasons.
  6. Though it is not clear that there does not exist a similar but opposite advantage to employees during the boom.


Bargaining Power, F.A. Hayek


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Hi, I'm C. Harwick, an economics PhD candidate in Virginia with an interest in monetary theory, institutional evolution, and folk music.

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