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Quote of the Day 12/15/09

If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself.[emphasis added]

James Madison – Federalist 51

BHO has appointed around 30 “czars” to manage various aspects of federal policy, most of which are not subject to congressional confirmation or oversight.

Among the most mischievous is Kenneth Feinberg, the so-called Pay Czar. He has cut the pay of many executives by up to 90%, with the flimsy claim that their salaries and bonuses are not in the best interests of the shareholders. What? Shouldn’t the shareholders decide what is in their best interest?

Of course, most folks don’t seem too concerned with this action, since it only affects the really rich people making their money on the backs of poor working stiffs. At least that’s seems to be the conventional wisdom, especially in a country of people fond of saying things like, “Why do athletes and movie stars make millions while teachers barely get by?”

OK, here’s a lesson in capitalism 101. Athletes and movie stars make what they do because a) there is a high demand for their talent and b) very few people can do what they do.

Teachers make substantially less money because the number of people who can do what they do is quite large, and, in a time of declining enrollment in an aging society, there is less demand for people who can do it.

But let’s get back to the mischief of Mr. Feinberg. We already have in place a set of laws declaring the minimum amounts that employers can pay their workers, despite the lack of a constitutional mandate for such laws. If government can set minimum wages, why can’t they set maximum wages? The ability to do one clearly implies ability to do the other.

There can be only one obvious result from this action. Sooner or later, some bureaucrat will decide what is a “fair” wage for middle managers, then further down the food chain, these same bureaucrats will decide what is “fair” for other high talent occupations. Sooner or later, all employees will be paid not according to their market value, but according to an arbitrary and arcane set of government standards.

The results will also be predictable. Positions paying more than their actual market value will have gluts of employees, and there will be a scarcity of employees willing to work at less than market value in other professions. Wage controls are, in fact, price controls, and they control the price of labor. When prices are set above market equilibrium, we get gluts (milk, for instance). When set below market value, we get shortages (oil, and soon, health care).

Government interference in free markets always leads to less efficiency than markets left to themselves. Always. But hey, we voted for this, so now we get what we deserve.

Or is this what you voted for?

fiat lux!

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