Monthly Archives: April 2015

Regulation and Inflation

Posted on by
Reply

Here’s one example of how regulation drives inflation, in the milieu of corporate CEO compensation. Charles Murray, at AEIdeas, provides it.

On multiple occasions the SEC [Securities and Exchange Commission] amended its rules to increase the disclosure of compensation data and to force boards to explain their rationale for the amounts. That, combined with the influence of the arbiters of corporate governance, created an inviolable requirement for compensation committees to be advised by consultants. A perfect recipe for increasing compensation.

Thusly:

In 70’s and even the 80’s the compensation of the CEO seemed to be mostly a matter arrived at between the board and the CEO that resulted from discussions and negotiations and the public disclosure was a matter of a few pages. But there was then nothing like the pressure to conform to best practices backed up by the reliance upon the advice of consultants and the concomitant availability of market data that there is today.
…
You can guess how it works. No board that isn’t about to fire its CEO really wants to admit that their CEO is a less-than-average performer by paying him or her less than average. But if the lowest-paid CEO’s are always being brought up to the average, then the average increases every year. Then for the high performers to be paid well, their compensation needs to be increased, but that raises the average…and so on every year. And the compensation committee and the board always have this market data before them, the recommendations of their consultants and “best practices” to adhere to. These influences are not easily resisted. You see the result.

It’s hard to believe the enormously intelligent regulators didn’t see this coming from the jump. The apparent abuse—that obscene CEO compensation—seems just another excuse to justify their jobs.

Global Trade

Posted on by
Reply

Governor and Ambassador, and currently Chairman of the Atlantic Council, Jon Huntsman had some thoughts in a weekend Wall Street Journal.

Expanded exports and open markets were central to our economic-security efforts to reconstruct Europe and Japan and keep lower-income countries free from communism.

Indeed. Such free trade imperatives remain central to freedom, to helping lower-income countries escape despotism generally, and to mutual and widespread prosperity. Huntsman went on:

Whereas today the world economy is replete with far-flung supply chains for manufacturing physical goods, it will be the free flow of designs and ideas that will increasingly constitute the economic linkages of the future.

True enough. The global economy, spurred on by that globalization, is evolving. Actually, the evolution will take a number of unexpected turns and paths, but Huntsman’s guess is as good as any.

But then Huntsman went astray.

….proliferation of empowered megacities and centers of creative innovation will challenge geographic borders, making it hard for capitals to call the shots.

The subhead of Huntsman’s piece emphasizes that basic problem.

Trade will be more important than ever 30 years from now. And a lot more complicated to regulate.

No. It’s not complicated at all to not regulate, and governments don’t need to—shouldn’t—call the shots. It’s not very much more complicated to not regulate very much. A free market doesn’t need very much regulation, and a free market global economy, for all the individual nations’ domestic laws may not be overly free, is the most prosperous global economy. Those who don’t want to play by free market rules when they enter that economy can’t force other nations to trade with them. That’s a free market decision.

Time Warner and Comcast

Posted on by
Reply

The merger has gone bust, harassed into being discarded by the FCC and DoJ. The latter, for instance,

…said it had significant concerns that the merger would make Comcast “an unavoidable gatekeeper for Internet-based services that rely on a broadband connection to reach consumers.”

This is an…ironic…concern, given that DoJ’s partner in the merger’s destruction had only recently arrogated that gatekeeper role to itself with its Net “neutrality” rule recently announced.

Unfortunately, with this FCC and this DoJ, we can’t know whether the cancelation of the merger was a good idea or a bad one. And that’s bad for business and bad for American consumers.

Get Off My Lawn

Posted on by
Reply

The union looking to organize workers at Boeing’s South Carolina plant has put its plans in a holding pattern, claiming workers are so opposed to signing up that they chased labor leaders off their porches at gunpoint.

Poor babies. That’s private property you’re trespassing on. Get off. Stay off until you have the owner’s permission. How is that so hard to understand? Even by a union hack.

More importantly, though: how did those union hacks get these workers’ home addresses? Who gave up that private information without the workers’ permission?

It also appears the union is making all of this up. The police say they’ve received no reports of any such behavior either in North Charleston, the location of the plant, or in the surrounding areas.

The hacks did go crying to their momma though.

The union filed an unfair labor practice with the National Labor Relations Board in which it alleged that “two organizers were threatened at gunpoint and others reported hostile and near-violent confrontations,” according to a union press release.

It’ll be interesting to see President Barack Obama’s NLRB make the case that ejecting trespassers from private property is somehow unfair.

Change We Can Hope For

Posted on by
Reply

A post-World War II-era program that forces raisin producers to give part of their annual crop to the government could soon be a relic of history.

Several Supreme Court justices expressed doubts Wednesday that federal officials can legally take raisins away from farmers without full payment even if the goal is to help boost overall market prices.

An immediately post-war New Deal law allows the Federal government to manipulate the market’s raisin supply by seizing a significant fraction of a raisin farmer’s crop and thereby prop up raisin prices—for the benefit of that farmer, you see.

Raisin farmers, over the specific period at issue (because law suits, quite properly, have to be specific in their allegations), were required to give up 47% (!) of their crop to the Feds. Marvin and Laura Horne were among the farmers so afflicted, and they demurred, refusing to give up their property, their raisins. For their effrontery, the Feds have fined them almost $700,000.

The law in question, though, is a follow-on from the Supreme Court’s earlier Wickard v Filburn case that gutted the Commerce Clause by allowing the Federal government to dictate to farmers how much wheat they could grow—and therewith to manipulate market prices. Wickard made possible all of the subsequent market interferences and farm diktats that the government has inflicted on the nation.

This case, Horne v Department of Agriculture, is an opportunity for the Supremes to begin correcting that original mistake.