Joseph Schumpeter- capitalism is by nature a form of economics change that is never stationary. Not only
because economics occurs in the social and natural environment which is always changing and therefore
alters economics with it. And not only because of population increase is economic. But because the
fundamental impulse that sets and keeps the capitalist engine running is the new goods and consumers,
methods of production or markets and the new forms of organization that capitalist enterprise creates.
He also argues that tech innovation was endogenous and causes creative destruction.
Oligopolies are good because they actually make profit because they set prices, and this
means they can use that money for innovation. If they don’t then they are destructed.
Three ways in which politics influences ER (relation of forces between union and capital)
o Impact on organizational resources
o Impact o structure of wider public sphere in which conflict occurs
o Impact on structure and org of workplace
Social/ cultural environment. Differences in political cultural and values between Canada and the usa and
how that affects union organization.
USA has more of a limited government and individualistic political culture, which makes it harder to
Lipset and meltz say Canada has a culture of more political support, which makes union organizing more
Exogenous factors and endogenous factors.
Key concept to understanding ER – equity efficiency, voice, sustainability.
1. Commodity – tradable and has economic value
2. Occupational citizenship – membership and entitled to rights
3. Disutility – lousy activity tolerated for benefit.
4. Personal fulfillment - physical and psychological functioning that ideally satisfies.
5. A social relation - a human interaction embedded in institutions, norms.
6. Caring for others – the physical effort required to attend to and maintain others.
7. Identity- method for understanding your place in the social structure.. history of work before 1700s small craft based economies. Paper mills.
Adam smith and the invisible hand. He says that merchant individuals tend to act in their interests, not intending
to promote public interest. He says this self-interest leads them to promote public interest, because they are lead
to sell fairly or they would be ousted by competition.
The classical school 1776 1871 (rough 1770- 1870) begins with publishing of wealth of nations
Influenced by Mercantilist doctrines, Physiocracy, the enlightenment, classical liberalism and the early
stages of the industrial revolution.
Adam Smith [1723-1790] originator of the Classical Economics. John Stuart Mill [1806-1873] is the
synthesizer of the school.
Mills Recognized the problems with markets well before Keynes
Admirer of Adam Smith.
Big believer in technology and progress. Understood the role of technological change
The ‘Neo-Classical School” 1870s-1990s
Classical economics as the predominant school of mainstream economics ends with the “Marginalist
Revolution” and the rise of Neoclassical Economics in the late 1800‟s.
Concept of marginal utility
Léon Walras' general equilibrium theory provided the foundations.
Alfred Marshall (Marshall’s conditions for Labour) **provided the tools for Neoclassical
•Neoclassical economics is an extension of Classical economics but, the focus of the questions changed
as well as the tools of analysis.
Classical Economics has persisted and influences modern economics, particularly the "New Classical
•The belief in the efficacy of a “free market” is central to both classical and neoclassical thinking
Application: Marshall‟s (1920) Key Determinants of Elasticity of Demand
•The more inelastic is labour demand, the more a worker can command in the labour market. And the wage
elasticity of labour depends on:
–1. Price Elasticity of Demand for the Product: The more elastic the demand for the product, the more elastic
the demand for the labor used making it. Elasticity of the product demand depends on the availability of
effective substitutes for the product.
–2. Proportion that Labor Costs Form of Total Production Costs: If this is low, firms are willing to give in
to higher calls for wages from workers. If labor represents 80 percent of production costs, the impact of a wage
increase will be greater for both parties.
Application: Neoclassical Key Determinants of Elasticity of Demand
Summing up: Demand for labour is more inelastic – a wage gain will produce a smaller drop in employment /demand for labour from firms– in proportion if/as :
(1) Demand for the product is inelastic;
(2) Labor costs form a small proportion of total costs and
(3) Possibilities of substituting technology are limited.
•Under these three conditions labour has more power relative to management.
The more inelastic is labour demand, the more a worker can command in the labour market. The wage elasticity
of labour depends on:
–3. Difficulty of Substituting Other Factors for Labor in Production: The greater the ability to substitute
automation/capital/technology for labor, the greater the elasticity of demand. At high enough wage levels,
anything becomes possible (i.e., virtual work, etc.,)
–4. The Supply of Other Non-Labor Factors of Production: If these are inelastic then they may offset a
wage increase. In essence labor‟s gains are partly at the expense of the owners of another factor of production.
(Not as relevant as 1-3)
•His understanding that the Great Depression was a „macro‟ event not produced by the micro-economic
concerns of neo-classical economics.
•A „bifocular‟ view of our economy.
•i.e., The ‘Paradox’ of Thrift.
….But Keynes Knew that „Rational Micro Behaviour‟ Can Produce Sub-Optimal (irrational) Outcomes
The ‘Early Industrial Relations’ School(s) – 1890s-1940s
The London school of economics/ Wisconsin school/ American school.
Understanding Human Behaviour Rational Decision Models Part I
• How should we (as consumers, workers, citizens) make decisions?
• the word “should” which is normally reserved for non-analytical situations and ethical decision-
• It turns out most rational decision-making models are just that; “hopeful” models because we
actual behave in ways, which contradict the ‘rational model’ in either small or large ways.