Under the Prospect Theory, when people need to take decisions in situations where they should choose from high-risk alternatives, their risk aversion is greater than their anxiety to get gains (Daniel Kahneman, Nobel Memorial Prize in Economics in 2002).
Published in El Cronista on February 4, 2020
The Expected Utility Hypothesis says that under certain axioms of rational behavior, the individual will always prefer actions that maximize expected utility (the von Neumann-Morgenstern utility theorem). These are precisely the parameters used by unions in the context of crisis and uncertainty as a result of stagflation (recession + inflation). Their aim is to get as much as they can, as efficiently as possible, without any restrictions.
As a matter of fact, unions prefer avoiding more losses to acquiring equivalent gains. They’d much rather struggle to survive than venture to win and lose their political or economic power, or representation. This is a logical phenomenon in an economy where the only reason to get a pay rise is the loss of the actual value of the currency due to the destructive effects of inflation. The lack of an economic plan, which is sought-after by bondholders and creditors, shows that for the time being the only priority is to refinance maturing debt. Seguir leyendo Free Collective Bargaining But Without Economic Planning