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Industrial Relations 201 Institutional Economics

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from the book of Bruce Kaufman Labor Relations in the US

from the book of Bruce Kaufman Labor Relations in the US


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  • 1. Institutional Economics (Bruce Kaufman) Report by Alfredo V. Primicias III In partial fulfillment of IR 201| Thurs. 6pm -9pm | Dr. Rene Ofreneo
  • 2. ARE YOU HAPPY? With the kind of job you do, are you HAPPY?
  • 3. Institutional Economics | Bruce Kaufman Alfredo V. Primicias III | IR 201 | Dr. Rene E. Ofreneo | Thurs. 6pm- 9pm 3 Goals At the end of this report, participants must have: 1. Enumerated at least 2 economic thinkers and their contribution to Institutional Economics 2. Recited at least 1 definition of what Institutional Economics is 3. Described the argument between Classical/ Neo-Classical Economics and Institutional Economics 4. Provided at least one contribution of Veblen and Commons 5. Summarized the importance of Institutional Economics with Industrial Relations
  • 4. Institutional Economics | Bruce Kaufman Alfredo V. Primicias III | IR 201 | Dr. Rene E. Ofreneo | Thurs. 6pm- 9pm 4 Origin •Started in America turn of the 20th century •Roots from the German historical school of economics •Influenced by the teachings of Karl Marx •Thorstein Veblen, John Commons and Wesley Mitchell are the founders (July 30, 1857- August 3, 1929) American Economist and Sociologist *opposed Karl Marx *combined Darwinian evolutionary perspective with his new institutionalist approach to economic analysis Professor of Economics and Senior Associate of the WT BeeBe Institute of Personnel & Employment Relations at Georgia State University (October 13, 1862- May 11, 1945) American Institutional Economist and Labor Historian at the University of Wisconsin (Aug 5, 1874- October 29, 1948) American Economist Bruce Kaufman John Commons Wesley Mitchell
  • 5. Rebellion in 1870s Institutional Economics | Bruce Kaufman Alfredo V. Primicias III | IR 201 | Dr. Rene E. Ofreneo | Thurs. 6pm- 9pm 5 Economics in the 19th Cent. German historical school of economics Classical and Neo Classical economists: A Smith, D Ricardo and J Mill System of Free Exchange provides: 1. max. liberty for employers and employees 2. reconciles conflicting interests into a harmony of interests 3. organizes production in the most efficient manner 4. results in a just distribution of income to labor and capital *Kaufman, Bruce. 1993. Industrial Relations: 30- 32. Cornel Univ. Press 1. Economists e.g. Richard Ely, John Bates Clark, et al criticized the classical and neo-classical theories 2. “represented a sterile exercise in deductive logic based on ‘natural laws’” 3. “Economics must be an inductive science where assumptions and axioms are adduced from careful historical study of economic behavior.” 4. Focuses on understanding the role of the evolutionary process and the role of institutions in shaping economic behavior– positive effects of state regulation and management of markets 5. Original focus came from Veblen’s instinct-oriented dichotomy between technology on the one side and the ‘ceremonial’ sphere of society on the other. 6. Emphasizes a broader study of institutions and views markets as a result of the complex interaction of these various institutions (e.g. individuals, firms, states, social norms). http://en.wikipedia.org/wiki/Institutional_economics Definition
  • 6. Institutional Economics | Bruce Kaufman Alfredo V. Primicias III | IR 201 | Dr. Rene E. Ofreneo | Thurs. 6pm- 9pm 6 *Kaufman, Bruce. 1993. Industrial Relations: 30. Cornel Univ. Press Presumed that product and labor markets were highly competitiveXXX XXX Based on empirical and historical research: MARKETS are imperfect and business firms monopolize power that exploits consumers and workers Unequal plane of competition Inimical to liberty Tyranny on workers due to lack of employment opportunities Coercion on workers to accept low wages and poor working conditions Business monopoly pushed low wages and high product prices
  • 7. Institutional Economics | Bruce Kaufman Alfredo V. Primicias III | IR 201 | Dr. Rene E. Ofreneo | Thurs. 6pm- 9pm | source: 7 Veblen's criticism of Neoclassical theory 1. He charged that Classical and neoclassical economics was pre-Darwinian in that it was moving toward some determined end (long run equilibrium) rather than constantly evolving in response to environmental forces (Darwin lived 1809- 1882). 2. Did not like static analysis, too many factors are held constant. 3. Did not believe that self interest would promote the public good. 4. He criticized the idea that “making profits is the same as making goods;” this may have been true in Smith’s time, but not in a more advanced industrial society where production is separated from ownership. 5. Populism holds that the common person is oppressed by the “elite" in society, which exists only to serve its own interests, and therefore, the instruments of the State need to be grasped from this self-serving elite and instead used for the benefit and advancement of the people as a whole. A populist reaches out to ordinary people, talking about their economic and social concerns, and appeals to their common sense.
  • 8. Institutional Economics | Bruce Kaufman Alfredo V. Primicias III | IR 201 | Dr. Rene E. Ofreneo | Thurs. 6pm- 9pm 8 Commons and the Welfare State 1.Regulation of public utilities 2.Industrial Safety Laws 3.Child Labor Laws 4.Minimum wage laws for women 5.Unemployment compensation laws
  • 9. Institutional Economics | Bruce Kaufman Alfredo V. Primicias III | IR 201 | Dr. Rene E. Ofreneo | Thurs. 6pm- 9pm 9 1. Focus on collective rather than individual action. 2. Preference for an “evolutionary” rather than a mechanistic approach to economics. 3. Emphasis on empirical observation over deductive reasoning. 4. Generally, institutionalists do not believe in the harmony of a market system. 5. Neoclassical economics studied allocation of scarce resources among alternative uses. 6. Institutionalists studied how the institutional structure evolved and how institutions reflected the prevailing social/political/economic structure.
  • 10. Institutional Economics | Bruce Kaufman Alfredo V. Primicias III | IR 201 | Dr. Rene E. Ofreneo | Thurs. 6pm- 9pm 1 0 Goals At the end of this report, participants must have: 1. Enumerated at least 2 economic thinkers and their contribution to Institutional Economics 2. Recited at least 1 definition of what Institutional Economics is 3. Described the argument between Classical/ Neo-Classical Economics and Institutional Economics 4. Provided at least one contribution of Veblen and Commons 5. Summarized the importance of Institutional Economics with Industrial Relations
  • 11. Institutional Economics | Bruce Kaufman | REFERENCES Alfredo V. Primicias III 0917-8047385 1 1 http://www.google.com.ph/books?hl=en&lr=&id=KxUdgbiDNosC&oi=fnd&pg=PR9&dq=institutional+economics+bruce+kaufman&ots=LhJM5BqFQC&sig=_MXs 0Kahd-BOHtsv9lAcyIkgYy8&redir_esc=y#v=onepage&q=institutional%20economics%20bruce%20kaufman&f=false The Origins & Evolution of the field of Industrial Relations in the US http://developmentinstitute.org/north/north_outline.pdf The Foundations of New Institutional Economics by Dr Douglass North http://www.wageningenacademic.com/_clientfiles/TOC/IEEOT.pdf?sg=%7BF855C04C-AA26-4BFC-8EFB-43A8C4E0CC14%7D Institutional Economics and Economic Organization Theory by LHG Slangen, LA Loucks and HL Slangen http://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1458&context=ilrreview Institutional Economics and The Minimum Wage by BE Kaufman http://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1458&context=ilrreview Institutional Economics and The Minimum Wage by BE Kaufman

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