US President Barack Obama is poised to reveal details of new rules limiting executive pay to $500,000 a year for firms getting a US taxpayer bail-out.
So says this BBC article.
My initial thought was that price regulation such as this rarely ends well. That price caps create shortages and other distortions. However this is not an unqualified price cap. It is a price cap for executives of companies that receive government bailouts. If you are an executive earning say $2 million per annum then such a reform means that you suddenly have a very powerful personal incentive to avoid government handouts like the plague. Not such a bad thing in my book. Actually it’s probably a powerfully good thing. Australia should immediately implement such a policy except it should not be limited to a bailout but to any form of government handout or subsidy. It would mean an effective end to a lot of what get’s called “industry policy”. And of course it fits snuggly with the populist rhetoric of the day so the symbolism is ripe for havesting.
Of course I don’t think Obama is viewing this thing quite the same way that I am. I think his genius in this regard is probably somewhat accidental.