Executive compensation makes it to the Supreme Court

Even for free-market types, there is such a thing as getting paid too much. That may be happening among mutual fund managers, which is why the Supreme Court began hearing arguments this week in Jones v. Harris. The case essentially deals with the higher rates that mutual fund advisers may charge their captive funds versus their institutional investor clients. The fund’s board of trustees generally negotiates on behalf of investors to arrive at this sum.

At first blush, the libertarian approach should be simple enough: Judges should not set the rates of mutual fund advisers, and instead should allow market forces to make the call.