An examination of how employers and employees may be encouraged to adapt to changing economic conditions through innovation and cooperation rather than conflict indicates that the system of dispute resolution in the United States contains substantial disincentives to resolving disputes through negotiation and substantial incentives to resolving disputes through the exercise of legal rights. Because it operates on the basis of institutionalized conflict and adversarialism, the legal system must be reconsidered as the ultimate arbiter of such disputes. The premises of labor policy must also be changed. Government must state that negotiation, cooperation, and the private resolution of labor and employment disputes are the preferred methods of resolution and of adjusting to economic change. Among other changes, the National Labor Relations Act should be modified so that all employer decisions with a direct impact on employment would be subject to negotiation with the union; in situations where a facility must be closed and/or production shifted in order to remain competitive, the bargaining unit should be defined as the work done or products produced rather than as employees at a given location; and employers should be permitted to hire only temporary replacements for employees engaged in an economic strike. (27 references) (CML)