AED Economics 200
Principles of Food and Resource Economics
Winter, 2003
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AED Economics 200 |
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Role of Labor Unions |
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| - to address "inequities"
in wages, working conditions, job security - to present a common voice in bargaining - to promote common interests of a group |
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History - began after Civil War; suffered legal setbacks at turn of century; grew rapidly in the 30s and 40s, and 50s; declined in past two decades. Knights of Labor (1869) - welcomed everyone, sought to improve wages, reduce work day, promote socialism. American Federation of Labor (1886) |
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| - union for skilled workers - addressed basic economic issues, not political ones |
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Legal Struggles - late 1800s |
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| - courts treated as illegal
conspiracies - Sherman Antitrust Act allowed unions to be treated as monopolies and to be prosecuted |
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Norris-La Guardia Act (1932) |
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| - workers permitted to organize without restraint from employer | |||
Wagner Act (1935) |
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| - established National Labor
Relations Board to investigate unfair labor practices - required employers to bargain in good faith with unions - prohibited employers from interfering with employees' attempts to unionize |
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Congress of Industrial Organizations - founder John L. Lewis |
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| - unionized industries (e.g. auto, steel) across jobs | |||
AFL - CIO (1955) - founder George Meany Taft-Hartley (1947) |
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| - gave states right to pass
"right to work" laws - prohibited unions from requiring companies to make union membership a precondition for employment - gave President right to halt a strike that could threaten national interest |
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Objectives of labor Unions: what are they? |
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| - maximize members' employment? - maximize total wage bill? - maximize income of limited number of members? |
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Practices of labor unions |
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| Effects of Labor Unions | |||
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| Financial Markets | |||
| - transfer use of capital from
seller to buyer - equity and debt used to finance assets - price for use of capital |
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| interest on debt dividends or distribution of "profit" |
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| - equity markets and credit markets | |||
| primary vs. secondary markets | |||
| - users | |||
| govt. entities - Debt: bills, notes, bonds businesses -Equity: common stock, partnerships, sole proprietorships -Debt: loans, notes, commercial paper, bonds, debentures |
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| banks -Equity: common stock -Debt: deposits individuals -Debt: credit cards, short term loans, mortgages, loans, etc. |
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Rate of Return to Capital (interest rate) |
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| Components | |||
| Risk-free, inflation free rate - time preference
of money Inflation rate Term of commitment (yield curve) Transaction cost - cost of making loan or investment Risk of future returns |
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Returns are comprised of two sources |
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| Current returns (interest, dividends, etc.) Change in market value (change in market value of stock, bond, etc.) Examples of historic rates of return |
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Two important concepts in valuing financial assets |
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| Present value - today's assessment
of the value of a future return stream Future value - value of future return stream at some point in the future |
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Future Value |
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| Single
Payment
FV = future value FV = (1 + k)n PV PV = present value k = interest rate or rate of return |
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| Present Value | |||
| Single Payment PV = FV (1 + k)n |
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| Multiple Payments PV = FV1 + FV2 + ... + FVn (1 + k)1 (1 + k)2 (1 + k)n |
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| Annutiy PVA = PMT 1 - (1 + k)-n k or PMT (1 + k)n - 1 k (1 + k)n |
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Rents: alternative definitions |
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| - rent: payments to owners of
real estate - economic rent: return above variable costs or returns to fixed resources" - pure economic rent: payment to fixed resource when its opportunity cost is zero perfect elastic supply - "rent seeking": efforts to artificially create rents |
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Profits: return above total costs |
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| - economic vs. accounting profits - sources of economic profits: uncertainty |
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| uncertainty arbitrage innovation |
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