The pre-war approaches to trade unions were mainly based on the theoretical and methodological viewpoints of early institutional economics. Trade unions were conceived of as politico-economic organizations whose members were motivated by relative comparisons and also were concerned with issues of equity and justice. In the post-war period, there was a major theoretical and methodological shift towards the idea of unions as optimizing economic units with well-defined objective functions which are optimized subject to purely economic constraints. This conceptual transformation took place mainly through the Dunlop-Ross debate, in which John Dunlop conceived unions as analogous to business firms, which was contrary to Arthur Ross’ institutional and political approach. The emerging post war mainstream methodological framework with its mathematical formalism and the exclusion of sociological, political and psychological elements from economic analysis was the main reason for the prevalence of Dunlop’s ideas. However, after decades of analytical developments, the current state of trade union theory has not produced very impressive theoretical results.The paper traces the historical development of the economic analysis of the trade unions from a methodological perspective. It examines the methodological reasons for the dominance of Dunlop’s approach and also the current state of, and the contemporary criticism towards, the established theory. Furthermore, it discusses the contemporary efforts to build a more comprehensive approach to trade union theory and to trade union objectives, also incorporating Ross’ institutional and political insights.
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