Producers provide less at lower prices:

Kenneth Feinberg, the Obama administration�s special master for executive compensation, said he is �very concerned� about the possibility his pay cuts may drive talent away from companies bailed out by U.S. taxpayers.

�I�m very cognizant of the concerns expressed by these companies,� Feinberg said today in Washington at an event held by Bloomberg Ventures, a unit of Bloomberg LP, parent of Bloomberg News. �The law makes it clear that the determinations I render are designed, first and foremost, to make sure those companies thrive and that the taxpayers get their money back.�

If you want to maximize profits, the flow from which you would repay the loans, you set the wage where you attract the best help. Private firms try to do this all the time. Perhaps Mr. Feinberg could enlist the help of a board of directors for these firms.

The U.S. will track possible executive defections by seeking from the seven companies data on comparative pay, by obtaining independent information and requesting �anecdotal evidence of vacancies and concerns about losing people,� he said.

And what would he do if he found he had lost talent from his firms? Would he raise the pay? What do you suppose would happen then? Buses by the homes of those who left?

Labels: economics, Obama