Noncompete Contracts Can Help Workers and Firms: Tyler Cowen

Noncompete clauses, contractual provisions that prevent employees from taking jobs with rival businesses or from starting competing firms for some period of time after they leave, serve useful purposes for both workers and companies. It would be better to regulate them than to ban them outright, as the US Federal Trade Commission has proposed.

The value of noncompete clauses is easy to illustrate. Say you run a hedge fund. Many members of your trading team will have partial access to your firm’s trading secrets, and if they leave they can take those secrets with them. In the absence ...