What do citizens really want?

Robert Reich obviously doesn’t understand how and why products come to market (We Need Public Directors on TARP Bank Boards, April 25). In reference to the decision between fuel-efficient cars and less fuel-efficient trucks and SUVs he says: “GM executives would have a perfect right, if not a duty, to disregard what we as citizens tell them to do in favor of what shareholders want them to do.” How does Mr. Reich think we “tell” car companies what we want? He seems to believe it’s through the political process. Not quite. We tell companies what kinds of cars we want to buy the same way we tell companies what kinds of cereal, neckties, and books we want to buy — we buy them. Basic microeconomics teaches that the more people want to buy a certain product (i.e. higher demand), the higher the price of that product. This goes a long way to explain why, as Mr. Reich reminds us, the trucks and SUVs are profitable and, consequently, what GM executives want to produce: they are what “we as citizens” really want.

Matt Hutchison
Chicago, IL

Washington hubris

Senator Dick Durbin, in his recent letter (Letters, April 22), concludes his justification of mortgage cramdowns with the following: "But doing nothing as foreclosures continue to increase will not end this recession." He seems to be saying that doing this particular something -- namely allowing "bankruptcy judges to modify the terms of mortgages which would otherwise fail" -- would somehow stop the economy's slide. It's amazing that the senator believes that flipping that one little switch will do so much to put hundreds of thousands of people back to work.

Economists can't settle on three things that caused the crisis, so the implication that Senator Durbin, after a long career in law and politics, knows the one thing that can fix it is incredible on its face. As hard as it is to predict the short- and long-term implications of cramdowns on mortgages themselves, something by definition less complicated than the broader United States economy, I find it hard to believe he can predict the ability of that one rule change to end the recession. On second thought, considering the typical Washington hubris, maybe Senator Durbin's confidence isn't that amazing after all.

Matt Hutchison
Chicago

College athletes and the NCAA

I submitted the following letter to the WSJ:

I concur with Richard Vedder and Matthew Denhart regarding the exploitation of college athletes. After reading The Blind Side by Michael Lewis about football player Michael Oher and the grief the Touhy family received from the NCAA for taking him off the streets and providing him with the structure he needed to become a star left tackle, I’ve become extremely suspicious of the NCAA’s rules. These rules are sold as being in the best interest of the athletes, though many times they are far from it. To add to the list of pay limits and transfer restrictions given by Messrs Vedder and Denhart, allow me to add what I consider to be just as egregious: rules that not only effectively force athletes to conscribe to the NCAA’s game but also heavily penalizes them if decide to leave early.

The NCAA, for all intents and purposes, is a monopsony, or, one buyer with many sellers. It has achieved this by convincing the NFL and NBA to prevent high school athletes from skipping college by making them ineligible for the professional ranks until they are a year or two removed from high school. In addition to that, the NCAA also discourages players from turning pro early by preventing them from returning to school under many circumstances, such as in the frequent event of an unsuccessful draft night. If they were really looking out for the best interests of the players, the NCAA would not disallow those athletes from returning to college over a youthful mistake, permanently cutting many off from what is likely their only opportunity to obtain a university diploma. Instead, these players would be permitted to come back to school, so they can better prepare themselves for the next level, whether it is professional sports or some other career. I wish it were so that the NCAA was looking out for the athletes, but in many instances it appears that it’s simply looking out for the business of college sports.

Matt Hutchison

The article to which I was responding is here. These are the important paragraphs:

Take Kevin Durant, for instance. After a stunning freshman season with the Texas Longhorns in 2008, Mr. Durant elected to forgo his final three years of college and entered the NBA draft. Selected by the Seattle Supersonics (now the Oklahoma City Thunder), he agreed to a contract paying $3.5 million in the first year. By contrast, his yearly compensation (in the form of room, board, books and tuition fees at Texas) amounted to about $33,120, less than 1% of what was offered by the Supersonics.

...

In a competitive market, companies cannot exploit workers in this way for long, as rival firms will hire them away at higher salaries. In basketball, however, the NCAA cartel prevents that, dictating limits on pay (essentially college costs) and even penalizing transfers to other schools. Strict rules also prevent college athletes from signing lucrative endorsement deals or accepting gifts beyond a certain amount. Soon after entering the NBA, Mr. Durant further augmented his earnings by signing a $72 million deal with Nike; he inked other endorsement contracts with Gatorade, EA Sports and Upper Deck.

AIG and their bonuses

From David Boaz at Cato:

Ex post facto legislation isn’t just bad because it’s unconstitutional. It’s unconstitutional because it’s bad.

The whole is here. And it's excellent.

Who supports free trade?

I submitted the following letter to the NYT in response to this letter from Senator Sherrod Brown:

Senator Sherrod Brown doesn’t quite understand the motivations of businesses that support free trade. Is it to earn some excess profits as they “[move] manufacturing jobs to China because of low wages”? Only partially, because as soon as they do, those profits are eliminated as their competitors do the same; their only “benefit from the status quo trade policy” is that they live to operate another day. In truth, most business owners who support or object to free trade only do so as a matter of survival. Either you’re trying to stay alive by lowering your costs via foreign trade or you’re trying to stay alive by keeping your competitors from lowing their costs via foreign trade because for whatever reason you cannot. So who, then, are the ultimate benefactors of free trade? It’s you, me, Senator Brown, and anyone else who lives on a budget.

Matt Hutchison

Religious Liberty

After today's lesson in EQ, I thought I'd add a few external thoughts.

First, from Joseph Smith:

“The Saints can testify whether I am willing to lay down my life for my brethren. If it has been demonstrated that I have been willing to die for a ‘Mormon,’ I am bold to declare before Heaven that I am just as ready to die in defending the rights of a Presbyterian, a Baptist, or a good man of any other denomination; for the same principle which would trample upon the rights of the Latter-day Saints would trample upon the rights of the Roman Catholics, or of any other denomination who may be unpopular and too weak to defend themselves.

“It is a love of liberty which inspires my soul—civil and religious liberty to the whole of the human race. Love of liberty was diffused into my soul by my grandfathers while they dandled me on their knees. …

“If I esteem mankind to be in error, shall I bear them down? No. I will lift them up, and in their own way too, if I cannot persuade them my way is better; and I will not seek to compel any man to believe as I do, only by the force of reasoning, for truth will cut its own way.”

Then I saw a very cool article in the Wall Street Journal:

"[Madison] believed that the main reason to have separation of church and state was to help religion. He came to this view in part because of an unusual but crucial alliance he built with evangelical Christians of his day... They believed that not only was government repression bad but so was government help. Madison agreed and worked hand in hand with the evangelicals to press this point. In a crucial document called the Memorial and Remonstrance, Madison integrated the arguments of the Enlightenment intellectuals with the arguments of the evangelicals to create something much greater. Separating church and state would be better for both state and church.

This may be a concept that's a bit jarring to modern culture warriors. We've come to think that if you're pro religion you must surely want government to play a greater role in promoting religion. And if you're in favor of separation of church and state that you must want to reduce religion's role.

Madison and his evangelical allies had a completely different concept. They wanted to promote religion. They just believed that the best way to promote religion was for government to leave it alone.

This basic approach has made America one of the most religiously free and religiously vibrant nations in the world.

That last sentence reminds me of a podcast on Econtalk with Larry Iannoccone I heard awhile back. He talked about how in the US we have somewhat of an entrepreneurial approach to religion, and that accounts for a lot of why we have so much more church attendance than other countries. If you have a state-sponsored church, the effect will be a limited number of other churches from which people can choose. The fewer choices, the more likely a given choice won't be what you want. Obviously, the less satisfied you are with the religious service, the less likely you are to attend or participate. On the other hand, if you "let a thousand flowers bloom", there is a better chance that someone will come up with a religious experience that suits you, increasing the likelihood of your involvement.

The freedom to worship as we please really has made us quite a "religiously vibrant" nation. And for that I'm grateful.