This chapter views labor markets as human ecosystems, particularly in terms of their embeddedness into social, economic, political, and environmental systems, and their adaptiveness to their social and natural environments. In this context, the insider–outsider theory may be generalized by reconceptualizing insiders and outsiders in terms of their relative adaptive advantages and the structural barriers to adaptation. The functions and misfunctions of adaptively embedded labor markets can be specified in terms of the adaptiveness as systems or the adaptiveness of the components of these systems. The insider–outsider theory indicates why there is no “invisible hand” whereby agents that are individually adaptive will lead to a labor market that is systemically adaptive at the labor-market or economy-wide levels. The ecosystemic approach also involves a reconceptualization of agents operating in labor markets, implying new theories of the firm and workers. The first- and second-best policy implications are briefly surveyed.