January 26, 2007
Profiting From Bad Government
Adam Smith is lovingly quoted by, umm, guys like me because of his defense of the free market and his defense of the morality of the free market. P.J. O'Rourke's new book reminds us --several times -- that Wealth of Nations is not a paean to capitalism. I remember a story of an economics professor who promised any of his students an A in his course if they could find a good word about businessmen in its 900 pages.
JohnGalt highlights the problem in an excellent post about Kyoto style carbon caps being embraced by GE, DuPont (Mon dieu, Pierre, Non!), and many utilities.
Highly capitalized companies at the top can usually find a way to profit from bad economic ideas -- or can lobby the laws to favor them somehow. While protectionism, anti-trust, and onerous regulation make us all poorer, it can make entrenched firms wealthier. The spectacle of business promoting anti-business legislation is, perversely, good governance and protection of shareholder value.
I'd add an article by Gary Becker and Richard Posner (my two newest, favoritist bloggers) in the WSJ Ed Page. They highlight the minimum wage as How to Make the Poor Poorer. They lay out clear and convincing arguments which are sermons to the choir at ThreeSources, but they also show the groups that have an advantage by higher minimum wages. Discussing the new Chicago minimum wage:
Who would favor such a bad ordinance? Conventional supermarket chains and clothing stores, of course, and unions -- the latter not only for the usual reasons but also because big box companies oppose unions; the ordinance sent a signal that unions have enough political clout to make life difficult for large nonunion retailers. The absence of opposition to the ordinance from low-income consumers is not surprising because they are not organized to exert political pressure. The aggressive support of the ordinance by most of the council's black members is more difficult to understand, but the explanation may be that they are allied with unions. They may have realized that their constituents would be harmed by the ordinance, but believed that in return for taking this hit they would get the support of unions for measures that would help low-income families.
The "party of the people" find themselves on the wrong side another time.
Economics and Markets Posted by John Kranz at January 26, 2007 2:07 PM