Monday, July 11, 2011

Some Thoughts on Negotiation

I don't claim to be any expert on the negotiating table. But I was, about ten years ago, the lead negotiator for my graduate employee union (~3,000 members.) I've spent plenty of time around unions, before and since. And in my years at the Working Families Party, where I was the designated wonk, I inevitably had some involvement with negotiations over the terms of bills. From which I derive an observation that's perhaps relevant to the debt-ceiling talks.

The principals are never at the table.

Maybe because they're busy; very likely because they're diffuse; or maybe they're only constituted through the negotiating process. In any case, there are not one but three negotiations going on: between the two agents at the table, and between each of those agents and their respective principals.

So for instance, the question for me as Local 2322 representative was not just what I think of this deal, but whether I can sell it to the membership. Even worse when you're trying to nail down health care legislation; the union at least has a defined membership roll but the coalition exists only insofar as there's a chance of passing something. In either case, your problem as a negotiator is the same: When you go back to your constituents, you have to convince them that the deal (1) is good enough and (2) is the best you could have got. What I'm talking about here is the tension between 1 and 2.

Let's say you've got some big demand -- a 20 percent pay raise, let's say. And let's say, miraculously, the employer agrees to this the first day of negotiations. This tells you two things: First, the deal you have now is better than you expected; but also, that the payoff to continued negotiations might be better than expected too. If they gave you this for just sitting down, they must be desperate; who knows what they would give if you could really hold their feet to the fire. So it's not actually easier for you to convince your principals to ink a deal at this point. You've got an easier time selling them on (1), but a harder time selling them on (2).

Now you might say this is irrational, unfortunate, people should know how to say, Yes. But I don't agree. The principal is not negotiating not just this once. So knowing which agents, or which kinds of agents, are reliable may be every bit as important as getting the best possible deal in this round. So they're observing, Did the negotiators keep pushing until the other side was ready to walk away, as much or more as, Is the outcome acceptable. From the principals' point of view, an early concession from the other side is a signal that this side's agents need to ask for more to prove they are doing their jobs.

In this sense, even if you (the agent now, like Obama) are happy to agree with everything the other agents have proposed to you, it's in your shared interest (yours and theirs) to only concede it at the last moment, and in return for the most costly concessions, to help them sell it to their principals.

Bottom line: Even if you intend to concede X, it's in everyone's best interest - including the negotiators on the other side -- that you don't give up X until the last possible minute. Conceding it early actually makes it harder for the other side to accept. This sounds like a paradox but I think it's really a perfectly logical and inevitable implication of the negotiating situation.

It's a broadly-applicable problem in economics, that a change in price has opposite effects if it's considered once and for all vs if it's considered as a proxy for future changes. Whatever the model says, one has to think a change in prices might continue. This is how bubbles get started. Just so, politically, current concessions makes the current deal look better -- statically. But the relevant question is, do they make the current deal look better, with respect to some future deal? To the extent that conceding now makes both look better, that effect is indeterminate.

So, Obama's a bad negotiator, then? Maybe. I have to admit, there;s something appealing, in a poetic-justice sense, to the idea that the decline of the labor base of the Democratic Party has led to a fatal loss of practical negotiating skills. The other, more obvious possibility, is that he is not trying to get the best outcome for the Democrats in the sense that most people understand it -- that he shares the Republicans' essential goals. But I might put it a little differently -- Obama's bargaining position is weak precisely because of his independence, the fact that he doesn't answer to anyone. Digby asks, quite reasonably, if we have any idea at this point what the President's principles are. I might put it a little differently: it's who are his principals.


  1. Thanks for posting this info. I just want to let you know that I just check out your site and I find it very interesting and informative. I can't wait to read lots of your posts.
    debt relief program