This Week's Song by The Raconteurs - Top Yourself

4.27.2009

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