Asymmetrical Information

You're getting it all wrong about who's supposed to make these decisions.

"We will go to binding arbitration only over the dead bodies of our leadership," Mr. Toussaint said at a rally Monday outside Gov. George E. Pataki's midtown Manhattan office. "Nobody decides the contract for transit workers except transit workers, regardless of what the law says."

Awesome!

Unions are appropriate when people work for a provider of a service with which there is competition. They are not appropriate, the public needs to defend itself in a case where they have a stranglehold on something everyone else needs desperately.

The incentives are terrible here: public decision makers in this case are politicians who just need to make the next couple-three years go well, and their negotiating partners are union guys who want to have their working careers be comfortable and short - so what works for the politicians is to sell out future citizens of NY on 55-year retirement, which will have an enormous cost for everyone in future, to get labor peace today.

"Unions are appropriate when people work for a provider of a service with which there is competition." In that case, one union will generally cover all the providers of that service or product, so the unions are still unaffected by competition.

E.g., the UAW once organized every assembly plant in this country, whether it was GM, Ford, Chrysler, or American Motors. When contracts came up for renewal, they'd pick the weakest target and call a strike there; once they got a favorable settlement from one, then they'd get the same from all the rest. UAW workers were getting more for totally unskilled labor than public school teachers in the same area, and the car companies just passed the cost on to their customers - as they also passed along the quality problems engendered when union shop stewards protected indifferent workers.

It worked as long as 90% of Americans wouldn't buy a foreign car, that is, up to 1973. VWs were teeny underpowered hippiemobiles, Volvos were for even weirder people, and Japanese cars were (wrongly) thought to be like VWs without the ruggedness. A few foreign sports cars and luxury cars were recognized as best in class (e.g. Mercedes-Benz) - but their prices were sky-high and parts and service were so hard to find that when a Mercedes finally broke down, it was likely to be down for months.

This ended with a crash in 1973. OPEC finally got organized, and gasoline was both scarce and expensive for several years. American gas-hogs became hard to sell, and the small cars rushed to market by American companies became by-words for junk fresh from the factory. (Remember the Chevy Vega?) Those funny little Japanese cars suddenly looked much more attractive - and when people started actually buying and driving them, they discovered that the Japanese had far surpassed the rest of the world in built-in quality.

GAAP applied to operating budgets would result in
fiddling with the depreciation tables for all assets the government purchases. Can't you just see a Senate filibuster over whether to depreciate the latest jet fighter over 10 or 20 years in order to make the budget hit one or the other Party's promises? In one sense, the deficit the government runs is the difference between cash accounting and accrual accounting because capitalization of assets pushes expenses on the the new generation (of taxpayers or managers in a business.) It would alse tend to give any future politicians an easy "out" where they can blame the tax increase on the politicians who came before them and deferred expenses through fixed asset capitalization.

Markm -- You shouldn't use the past tense when referring to pattern bargaining in the automotive industry. Pattern bargaining is alive and well. Granted, they don't usually end up calling a strike -- the threat of one is usually sufficient.

Those early imported Hondas developed rust holes in their front fenders awfully fast.

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