The Auto Industry

In recent days and weeks, the focus of the media has been on the auto industry.  The fallacies are abound in every story that the media tells, and the poor economics we have come to expect from them also is still alive and well.  The common consensus of the partisan media(i.e. all of them), is that the auto industry failed because the companies (GM, Ford, Chrysler) made cars that people did not want to buy, and the executives of the companies were too greedy.  The first point may be true, because if people liked the cars they would likely buy them, but the reasoning behind it is almost universally incorrect.  The auto industry has mandates provided it by state and federal governments on how their cars have to run.  A certain amount of emissions are allowed, certain vehicles have governors that restrict the speed above a certain point, and many other restrictions that dictate how a car can run.  These restrictions have created a barrier in the automobile market, between the consumer and the producer.  If the consumers truly desire cars that are for lack of a better word "green", they will demand them.  What we have seen in the past few years is that these people DO NOT desire these cars, because if they did the auto industry would not be in trouble.  What we have here is the government telling a producer how they can produce cars, and in the process they are disabling the normal functioning of that sector of the economy, and further hurting all of us. 

The second point is completely incorrect for a multitude of reasons.  When people say  "greedy", they are  implying that someone is  demanding compensation above what they deserve.  If someone demands compensation above what they deserve, a non barriered market will prohibit them from doing so, because there will be cheaper alternatives in that market (in this case the labor market) that the firm can ultimately hire for a lower price.  When the firms in the market continue to hire these employees at a price below the "greedy" price, they will drive down the price that the "greedy" person expects to receive, until the point where that person is no longer "greedy".  The fact that greed is seen as a negative act is somewhat of a misnomer, at least in the proper functioning of a society and an economy.  People need greed, if we didnt have it none of us would be alive.  We need to be "greedy" enough to demand food, clothing, shelter and whatever amenitites we desire, and we have a pretty nice system set up for us to recieve them.  Whenever we have the desire to be "greedy", we do some form of work to create a good or service that someone else sees fit to compensate us for.  Next we use the received compensation to buy whatever "greedy" goods we want.  This is not a bad thing, but a perfect tradoff of goods, services and desires.  Greed is a misnomer in its current usage, because greed currently implies that a person receives things that they do not deserve, which again is not the proper definition.  According to wikipedia.org, "Greed is the selfish desire for the pursuit of money, wealth, power, food, or other possessions, especially when this denies the same goods to others".  I do agree that if I buy a good or receive payment for a service, that denies it to someone else, buy that is not a bad thing.  If I buy a good or service, and someone else demands the same good or service, there is now greater desire in the producers eyes to actually produce more of that product.  The more and more that is demanded in the market, the more and more the producer will make.  The more the producer makes, the lower the price the market will dictate, and the greater the benefit to society of the lowered prices.  Greed therefore is not a vice, as Catholicism says, but is the driving force among human interactions, and the reason why market economics always drives us to equilibrium.

To adress the initial point of the last paragraph, the executives of automobile companies are not greedy, just experts at what they do.  Many of them are in their positions because of their economic expertise, or vast knowledge in some other field.  The reason they can demand such high wages is that they are deserving of them.  Humans have few outliers in the realm of education and intelligence, which is why we henceforth reward those who make it their pursuit to achieve the highest in either or both fields.  The reward for these men and women is that they receive a higher salary, because they have done the intermediate work to receive that compensation.  As was mentioned before, if their asking price were too high, there would surely be at least one other person who could be offered the position for a more reasonable price.  Basic market supply and demand works for this market just like any other, although the controls attempting to regulate it have created a disposition between the buyers and sellers of the market.