I'm a little behind on blogging, but I wanted to mention an article written by Ben Stein in the 11/20 edition of the NYT: Everybody's Business: Don't Beat Up Big Oil; It's Just Doing Its Job. The article was in the Business section, but is no longer available for free online. It is available on Westlaw.
In the article, Stein laments the circus of the recent congressional hearings whereby media-savvy senators quizzed oil company executives about why these companies mysteriously posted profits during a time of high oil prices and low supply. This article reminded me of a thread started by Vic and Kate on this blog and carried over by Matt Bodie on Prawfs about whether any type of compensation in a market economy could be "undeserved." I assume that Stein would say that the answer to this question would be "no," but then he surprised me with asking a subtler question. If there are those that think that some compensation is undeserved, then wouldn't those people be focusing on a different group than oil companies:
If oil company profits are bad, why are profits at hedge funds sacrosanct? I am always amazed that no one in Congress raises a finger when entities that perform the valuable function of trading derivatives based on arcane debt instruments make staggering profits that go into making their traders multimillionaires at 30 -- and good luck to them, I say. But when a company that allows us all to heat our houses and drive our children to school makes money, somehow that is a sin. Why?
I am working on a paper on our culture's resentment of windfalls. In contracts, we learn that breach may be efficient, but windfalls are not allowed. Why not? Why are we concerned about windfalls, whether they be from having one's contract breached or from being a victim of another's negligence or from being a victim of a national disaster? Why is there also scorn for indirectly profiting from a national disaster because of low supply and high prices? And, yes, why is there scorn for generating a fee when little if no value is created by your own activities, whether you are a hedge fund manager, an I-banker or an attorney? (See next post for continuation of thread.)
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1. Posted by Robert Schwartz on November 28, 2005 @ 16:15 | Permalink
"The article was in the Business section, but is no longer available for free online."
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