Most of these points will be familiar to economists, but I hope my reiterating them is useful to others.
1. Like any strike, this is a classic case of people fighting over the division of a pie while the pie shrinks. The pie is the huge gains from trade that result from writers and producers working together, and every day that passes without a contract represents more unrealized gains from trade. Both sides lose as a result.
2. That does not mean it’s irrational or wrong for the writers’ union to strike. The gain they get from a larger slice of the pie could outweigh their losses during the strike period; clearly, the union leaders think so. Moreover, the situation is symmetrical; either side could end the strike by acceding to the other side’s demands. A strike occurs when both sides play hardball.
3. In general, unions drive wages above the competitive (market) rate, and this is why economists often don’t like them. A union is like a cartel, with many of the same ill effects, including underproduction. However, in this case, the producers are also negotiating as a bloc. I’m not sure what loophole in antitrust or labor law allows them to do so, but it’s common knowledge that they do. So what we’re looking at here is essentially a bilateral monopoly: one bloc of buyers, one bloc of sellers.
4. The bilateral monopoly emphasizes, again, the symmetry of the situation. Both sides have each the other over a barrel. A clear victory by either side would likely be inefficient. Set writers’ compensation too low, and writers will write too little; but set writers’ compensation too high, and producers will produce too little (and hire too few writers). Either way, we don’t get as much entertainment output as we should. Some writers on the margin could be shooting themselves in the foot by demanding too much, inasmuch as they won’t share in the higher compensation if they are not employed.
5. The efficient level of compensation for writers is far from obvious to me. This is why I find the ideological rhetoric employed by both sides, but mostly by the writers’ union, frustrating. Maybe the writers are getting paid too little, but I haven’t seen especially compelling evidence one way or the other. I’ll grant that insiders might have such evidence, but I doubt the rank-and-file know much more than I do.
6. Probably the best evidence I’ve seen that writers’ compensation should be higher than producers will agree to is the actions of writer-producers like show runners. Given their dual role, writer-producers were forced to decide which side of the picket line to stand on; on Wednesday, about 100 of them sided with the writers. Since writer-producers share in both the gains and losses from giving writers higher compensation, they seem relatively well-positioned to know what level of compensation would maximize the joint gains from trade. On the other hand, the article doesn’t state how many writer-producers did not side with the writers. Also, I wonder about the extent to which ideology and a sense of solidarity, rather than a concern with their own total compensation, contributed to their decision.
UPDATE: More here.