This dissertation is concerned with "third-party" or "external" effects that pervade the economic dimension of human action. As an instance of these effects, actions in a specific market, the labor market, are isolated and studied. In the first part of the dissertation, the evolution of labor law in the United States is traced from the earliest recorded labor court case in 1806 through the present. In examining the dialogue surrounding changes in labor entitlements, it is found that the ubiquity of external effects in the labor relation has been historically recognized by lawmakers as they grappled with the design of optimal legal rules. The second part begins with an examination of economists' views of the labor relation. A survey of views indicates that economists have failed to approach labor actions in a manner that is both analytic and cognizant of the pervasive interdependence in labor. The concluding chapter of the dissertation attempts to integrate the disparate viewpoints of lawmakers and economists py viewing labor actions in a manner which highlights the external effects. Borrowing from the literature on "externalities," the chapter demonstrates that there exists a continuum of possible magnitudes of external effects in labor. / Doctor of Philosophy