The Friedman-Durbin Amendment?
In The Week (October 31), the Editors write that the Durbin amendment’s cap on the fees that merchants pay for debit-card transactions prompted banks to “transfer the fee from merchants to their customers” in the form of a $5 monthly charge for debit-card users. But I think it was Milton Friedman who noted that the final consumer pays all costs: The fees were already being paid by consumers. I own a retail store. When you raise credit- or debit-card fees, I raise my prices. (And incidentally, Bank of America has since killed the $5 fee.)
The piece also calls the measure “a special favor to retailers” that Durbin inserted “having been lobbied by one of the nation’s biggest retailers, Walgreens.” However, the law is a boon for retailers of all sizes, and rightly so: Previously, according to the contracts they had to sign to accept cards, retailers often had to socialize the cost of interchange fees, raising prices for everyone regardless of how they paid. Now, under a Durbin-amendment provision your piece doesn’t mention, businesses may offer a discount for customers who pay in cash — charging each customer for the services he uses. I believe you will see many small businesses doing so in the new year.
Newport News, Va.
The Editors reply: How much power businesses have to pass on costs to consumers is the subject of some dispute among economists. Extra costs can raise prices; they can also reduce profits, reduce quality, reduce choices, or reduce wages, depending on the particulars of the market in question. Why anybody would think that Senator Durbin is better positioned to manage relations between merchants and service providers than are the merchants and service providers themselves suggests at the very least an unfamiliarity with the career of Dick Durbin.
Beyond Art History
Kudos to Andrew Kelly for his excellent piece extolling the virtues of vocational training (“Beyond Home Ec,” October 31). For the past half century, and much to our eventual disadvantage, America’s educational cadre has sniffed at the nation’s tool and die makers to concentrate on baccalaureate-seeking theorists. Skilled workers in the utilities and manufacturing trades now command a fairly healthy salary owing to this bias and their relatively low numbers.
The “taxi driver with a master’s degree in art history” conundrum that leads the article requires no explanation for those with a basic knowledge of supply and demand. Almost irrespective of where we are in the business cycle, engineers and other such applied-science-trained individuals generally suffer few disappointments in seeking employment. So while I would not advocate a math-and-science diet for all collegians, I would suggest that all research their post-graduation employment prospects. At least that way, should they still press on for a doctorate in art history, they will do so with full knowledge that the corporate world regards their discipline as essentially without value.
K. O. Randel