Crony Capitalism

You need to watch the five minutes of this video that start at 2:01:36 (move the arrow to get to that spot). It’s Professor Russ Roberts, of Econtalk fame, testifying before Congress on executive compensation and the latest area of government intervention into our economy, salary caps. The text of Roberts’ testimony is found here. You can probably read it more quickly than you can watch it, but seeing Roberts’ anger and passion is worth the watch.

Here’s an excerpt: “Many people argue that because the government handed out the money, the government has a right to dictate how it is spent. It’s a reasonable thought in personal relations. If I offer you money, I have a right to attach strings to my generosity. But in a constitutional democracy like ours, it is not the government that has rights. We, the people, have rights. The Constitution exists to restrain government, not to empower it. Whether government has the right or not isn’t the question. The question is whether we want government to have the power to set compensation. Despite our anger, the answer is no. F. A. Hayek, the Nobel Laureate economist, said: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” The Special Master imagines he can design compensation packages that “align incentives” while “retaining key talent.” But it is impossible for any one person—no matter how wise—to anticipate the consequences of such decisions. Certainly the Special Master does not possess that knowledge. Nor does he have any incentive to acquire that knowledge. He has no skin in the game. Worse, a single individual has been given enormous arbitrary power. He threatens to expand that power. This is not good for the rule of law, democracy or capitalism.”

Amen and amen.

SDG, The Farmer

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