I have a personal story about doing business with (or trying to do business with) an automaker.
Entrepreneurship
Who is Less Free than 40 Years Ago?
Over at Reason [h/t Instapundit], Veronique de Rugy asks:
Many libertarians, eyeing the relentless expansion of the state, worry that freedom is marching backward. But are we really worse off than we were 40 years ago?
She surveys many aspects of freedom in modern life and concludes that on the whole we have gained more freedom than we have lost. Missing from this survey, however, is one critical area in which freedom has shrunk dramatically.
Economic freedom, especially the freedom of economic creativity, has contracted.
Obama, the Democrats, and the Economy–continued
(This is a continuation of my post on the election and the economy from several days ago. At that time, I focused on energy and trade; in this update, I also talk about small business, the demonization of entire industries, the micromanagement of innovation, the proposed elimination of the secret ballot in union elections, and corporate tax policy.)
Why Executives Cost So Much
In my previous post, I explained why business spend a great deal of money on executive pay and why the rest of us should be glad they do.
However, this raises the question: Why do we have to spend so much money to hire a small number of decisions makers? Even if the decisions they make determine the success or failure of entire businesses why does it cost millions to hire them? After all an executive doesn’t need the money to actually make decisions. In theory, an executive will make the same decision if you pay him $100,000 a year as he will make if you pay him $1,000,000.
So why do greedy capitalists pay millions to hire executives when in theory they could get the same decisions for less money?
The answer is deceptively simple:You have to pay an executive more than he could make running his own private company.
Navigators of the Economy
Life aboard ship in the age of sail was brutal, even by the standards of the day. Ordinary sailors worked in horrific conditions for months on end for little pay and often for nothing more than just a stake in the profits of the voyage.
Easily, the cushiest job on a ship was that of navigator. Navigators were quite often hired guns who had no other duties. A navigator often needed to work no more than four hours a day. He would come on deck two or three times a day to take sightings, then return to his cabin for an hour’s worth of calculations. Compared to the physically taxing, mindlessly repetitive and dangerous work of a sailor, navigators did nothing and risked nothing.
Yet navigators often received as much as much as 25% share in the profits in a voyage. Even when they worked for pay, they received a wage many, many times that of sailors who did much more arduous and even critical work. Why did those who owned shares in a voyage, from the cabin boy to the landlubber investors tolerate paying the navigators so much?
The answer is obvious: if the navigator made a mistake, it didn’t matter how hard everyone else on the ship worked or how competently they did their jobs. The skill of the person doing the navigating determined the success of the voyage or even if anyone survived. People paid navigators a lot because if they didn’t, it didn’t really matter how much they paid anyone else.