Economics:There are two aspects to the issue of bullying in the workplace. One, the moral aspect, is clear enough: bullying is a disgusting practice which degrades individuals, writes  Marc Coleman

Moreover, unlike bullying at school or by neighbours, the workplace bully is harder to avoid.

Thousands of Irish people have to run the gauntlet of co-workers or employers who turn their place of work into a psychological prison.

The moral approach to workplace bullying requires laws, closer co-operation between managers and trade union representatives with tough action on the part of the former (it also requires some courage on the part of victims to stand up for themselves).

Last week the Economic and Social Research Institute (ESRI) published an extensive report on bullying in the workplace. Admittedly, in publishing this tome (some 160 pages long), the institute was wearing its "social" rather than its "economic" hat.

In spite of that, the report revealed a frankly amazing finding that puts beyond doubt, in my mind at least, that there is a second, economic aspect to this disease: the two sectors of the economy in which workers are most likely to be bullied are the health and education sectors - i.e. the public sector.

This is - or at least ought to be - totally counterintuitive. Surely, bullying is a private-sector affair? Ask yourself to describe the archetypal bully and a Gordon Gekko type probably springs to mind: an aggressive alpha male driven by the prospect of profit, power and promotion into pushing his colleagues aside.

Bullies are always powerful, pushy and hungry, right?

Like many popular prejudices, this one is completely wrong. To understand why we need to turn to an economist by the name of Ronald Coase.

In 1935, Coase wrote a paper on the theory of the firm in which he asked the following question (the answer to which, incidentally, got him the Nobel Prize in Economics 56 years later): why do we form organisations in the first place?

Put another way, why don't we organise our economy along the lines of pure competition between individuals?

Why, for example, does a company hire its own accountant when it might instead engage a one-person accountantcy firm in an outsourcing arrangement? Both microeconomic theory of the firm and the theory of management strategy would say that firms should stick rigidly to their knitting and outsource all but the bare essentials.

Smaller firms cannot afford to do anything else. Larger ones have traditionally gone far beyond hiring accountants and have a whole spectrum of people doing wildly different things, although private-sector organisations are increasingly outsourcing. Coase's answer to the question was that whether a firm hired or outsourced depended on the costs and dangers of doing everything according to free market principles.

For complex organisations certain types of contribution, solicitors and accountants for instance, were hard to trust to the market.

As well as costing an arm and a leg to hire by the hour, such workers tended to accumulate lots of knowledge about an organisation in the course of the work, knowledge that was better brought under the wing of the organisation and given secure employment that would keep them there for life.

The relevance of the public sector to bullying is as follows: public-sector organisations tend to fit far more into the latter description than the former - large organisations in which many people are employed directly beyond what might be considered the organisation's core competence.

To see the link, consider what bullying really is: it is an act of domination or humiliation committed by someone who has power against someone who has little or none.

This is where Coase's work comes in. When organisations employ staff rather than outsource them, they cross a crucial barrier that separates the market - a world of performance and merit - and the organisation - a world of power and hierarchy. This transition leads to the formation of what economists call monopsony power. The opposite of monopoly power, monopsony is where a person or firm is dependent upon one customer. It describes, at least in the short term, the relationship that most of us have with our employers.

If a self-employed person gets abuse from a customer, they simply find another customer. At the very least in the short term, an employee is stuck with an employer.

Their fate is then determined by two further considerations - the ease with which bullies can be identified, judged and expelled; and the ease with which the victim can escape.

Here the relative advantage of the private over the public sector is less clear. The profit motive and the need to keep good staff could cause the swift dismissal of someone bullying a talented colleague.

But what if the bully is themselves talented? Public-sector workers are better protected from bullying by trade unions but then bullies are harder to fire in the public sector. Whatever the truth, one trend is heartening: a rising generation of workers is learning to develop marketable skills and preserve them through their careers.

And a survey earlier this year showed that workers are more willing to use them; some 41 per cent of workers surveyed said they would switch job this year.

Writing in the 1930s, Coase could only think in terms of a choice between two extreme opposites; working for an employer directly or being sub-contracted.

But something new has been born; an economy in which an ever more diverse worker develops and exploits their skill set with several employers, sometimes one after the other and sometimes with several in parallel.

The fact that we have a full employment economy has also given workers more freedom to choose between employers. Now that's what I call a liberation of the masses.