A Post On Unions You Should Read

Posted by Jeff Carter
on February 20th, 2011

One of the first things you learn in MBA school at the University of Chicago is that economics are all around us. Like the heartbeat of the human body, principles of microeconomics hum at all times in every decision that we make. Professor Kevin Murphy of the Booth School famously tells everyone that there is a marriage market. It turns a seemingly emotional individual experience into supply and demand curves! Most people don’t like the idea that their choice for a spouse was determined by economic concepts, but its quantifiable and can be proven.

Over at Chicago Boys, they have been covering the unions riots in Madison, Wisconsin. I came across this post. I think it’s required reading before anyone picks a side on this issue.

It should surprise no one that a union acts in its own self interest, just like a corporation. Every entity and individual acts in the world to maximize their utility, or profit. Greedy shareholder owned public companies are no different than the AFL-CIO. The AFL-CIO isn’t as concerned about its membership, as much as it is concerned about the survival of the AFL-CIO.

Because the AFL-CIO is a private organization, they don’t publish their salaries in a transparent manner online. Compare that to a publicly traded company. Publicly traded companies post the salaries of top employees, and the pay scales of everyone that serves on its board of directors.

Richard Trumka, the current president of the AFL-CIO complains about business executive salaries, but he is not very revealing about his own. Wouldn’t it be interesting to see a balance sheet, income statement and cash flows statement from the AFL-CIO?

The current Democratic spin about this situation is that unions have fought for better working and safer conditions for union members. This was once true when talking about truly dangerous jobs. However, in the case of Wisconsin we are mostly talking about government employees that sit in an office, or teachers that teach in a classroom. Not a lot of danger there, unless carpel tunnel is now considered as dangerous as some of the things millworkers and miners encountered.

The way we pay our government employees is unsustainable. Any candidate that refuses to tackle that issue head on, or dodges it in a debate should not be elected to office. It is a dereliction of duty. At least when a company is poorly run, shareholders have the chance to sell the stock and eliminate it from our portfolio. In the case of the government, we can elect new representation, but we are still stuck with the left over ghosts of the past government.

There are words to describe a lot of things in the athletic world. Coaches tend to use a lot of coarse adjectives to describe actions or behavior. If I were a coach describing the actions of the Democratic Senators that walked out so they didn’t have to vote, I’d call them “chickenshit”. No other word for it.

thanks for the link Doug Ross

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