Now that our season is over...

[Jim Hyla]

Inequality in income and wealth is a good thing. Gradients drive change, encourage innovation

Well, we certainly have had change in our economy over the past 2 years. After all the ratio of executive to worker pay is about an all time high and look how it has helped us. The nice innovations have brought us closer to depression than any time in the last 80 years.

Look, I expect to get paid more than the garbage pick-up man, but there has to be a limit on how much the money changers make compared to the workers. I'd like to have you show me why our economy is so much better now than it was when the discrepancy was less.

[Trotsky]

I expect to get paid more than the garbage pick-up man

I don't.  You literally could not pay me enough to be a garbage man, a soldier, or a middle school teacher.  That's where I'd pour money for fear that the talent would leave.  And all three jobs are a lot more important than anything with executive severance.

[KeithK]

Business school curricula legitimize the role of private business in our society? truly shocking! who would have thought?

Inequality in income and wealth is a good thing. Gradients drive change, encourage innovation.

One would think the history of the twentieth century would serve to refute and discredit anything that Karl Marx had to say.

You know, Keith, people who throw words like "Marx" and "socialism" around loosely really add nothing substantive to the discussion.  You can't be as shallow as propaganda artists like Palin and Beck and O'Reilly, can you?  Give us all a break and drop the right-wing blather.  It adds nothing to eLynah.

I don't consider it throwing Marx around loosely when I'm responding to someone who brought up Marx as someone who should be taught in business school. Sure my post is a little snarky but it's far from right wing blather. I could say that people who immediately compare anyone with "right-wing" ideas to Palin, O'Reilly and Beck aren't adding anything substantive to the conversation either and are also being pretty shallow.

[KeithK]

I expect to get paid more than the garbage pick-up man

I don't.  You literally could not pay me enough to be a garbage man, a soldier, or a middle school teacher.  That's where I'd pour money for fear that the talent would leave.  And all three jobs are a lot more important than anything with executive severance.

Funny thing how the market works.  I wouldn't want to be a garbage man either.  but apparently some folks do because we've got a pretty decent supply of them without needing to pay them seven figure executive salaries. Likewise soldiers and middle school teachers.  That's not to say it never makes sense to increase the pay of such fields in order to increase supply. But it's silly to think that teachers will be paid more than a business executive because you think it's more important.

[Jim Hyla]

I expect to get paid more than the garbage pick-up man

I don't.  You literally could not pay me enough to be a garbage man, a soldier, or a middle school teacher.  That's where I'd pour money for fear that the talent would leave.  And all three jobs are a lot more important than anything with executive severance.

Funny thing how the market works.  I wouldn't want to be a garbage man either.  but apparently some folks do because we've got a pretty decent supply of them without needing to pay them seven figure executive salaries. Likewise soldiers and middle school teachers.  That's not to say it never makes sense to increase the pay of such fields in order to increase supply. But it's silly to think that teachers will be paid more than a business executive because you think it's more important.

But Keith, you didn't respond to my original comment at all. Just to that snippet that Trotsky cut out.::whistle::

[mnagowski]

I expect to get paid more than the garbage pick-up man

I don't.  You literally could not pay me enough to be a garbage man, a soldier, or a middle school teacher.  That's where I'd pour money for fear that the talent would leave.  And all three jobs are a lot more important than anything with executive severance.

Funny thing how the market works.  I wouldn't want to be a garbage man either.  but apparently some folks do because we've got a pretty decent supply of them without needing to pay them seven figure executive salaries. Likewise soldiers and middle school teachers.  That's not to say it never makes sense to increase the pay of such fields in order to increase supply. But it's silly to think that teachers will be paid more than a business executive because you think it's more important.

But Keith, you didn't respond to my original comment at all. Just to that snippet that Trotsky cut out.::whistle::

He also didn't respond to some of my empirical evidence...

[KeithK]

But Keith, you didn't respond to my original comment at all. Just to that snippet that Trotsky cut out.::whistle::

He also didn't respond to some of my empirical evidence...

Busy morning people.  I grabbed the low hanging fruit.  Geeez...

Why exactly does there have to be a limit on how much the money changers mke compared to the laborers?  They make money based on their economic value they provide for their employers. Like it or not a bank exec produces more value on average than a garbage man or your average worker. So he gets paid more.  Certainly there are inefficiencies and transients - in a bad year the bank exec might effectively be worth negative dollars but on average it works.

I'm not immune to the emotional raction you get when you see some folks making absurd amounts of money.  It annoys me that the folks in legal at my company make a lot more than I do when they produce absolutely nothing of value (they don't build satellites). But when I think about it rationally I understand that they protect the company from potential losses and thus "produce" more than I do per capita.

I'm not comfortable with having any government or external body enforcing compensation limits. If a company wants to limit itself fine. But if it wants to pay exorbitant salaries then that's their right, or ught to be.

Looking at the chart there hasn't been all that much variation in Top 1% income share through the years. There was plenty of inequality in the 60s by this measure. I'd be real hesitant to say that the relative decline in this one metric was the reason (or an especially big reason) for the growth in that time period.

I do agree that there is an extreme where inequity can lead to severe problems (put the metric you cited at 99% for instance :-)). But what constitutes "moderate" is highly subjective. I don't have any problem with the levels we have today especially considering the immense wealth that we have in this society.

[RatushnyFan]

There's no "immorality" associated with making an honest living.

You believe that Wall Street has been 'honest' over the last decade?

I've worked on Wall Street for the past 18 years and I certainly have been honest.  So have the two banks that I've worked for and my bank hasn't taken a dime of taxpayer money.  The VAST majority of bankers are honest people, don't paint us all with the same brush.

I'm presuming that those that argue that i-bankers make too much money would also argue that A-Rod is overpaid?  I'm not going to debate the worth of a banker versus a teacher (or other occupations), I think that both are necessary.  Without great teachers I wouldn't be able to do what I do.  But there's been a lot of hard work and personal sacrifice to get here (and stay here.......).

My $0.02.

[Rosey]

They make money based on their economic value they provide for their employers.

It's a little more complex than that: this produces an easily-analyzed upper bound on pay, beyond which the work is not economic.  (E.g., if you pay out more in salaries than you receive in revenues for the work performed, you're going to go out of business.)  It does not lower bound pay, but in general if a job is difficult enough or requires enough training, there will be few enough people willing and able to do the job such that pay will be higher than for jobs requiring only unskilled labor.

A lower bound on pay would logically be related to the return on investment of training (e.g., increased pay vs. the time and effort spent learning the skills), but (a) we all know people whose parents shelled out $$$ for an Ivy League education and still ended up working at Starbucks because they had no plan and majored in something with no value and (b) the link between increased education and increased pay is not clearly causal, much less a certainty for any one person.  Furthermore, the market for skilled labor is much less liquid than the one for unskilled labor: it's easy to assess the economic value of someone who digs ditches based on how much dirt they are able to move in an hour, but how do you judge the value of a software engineer or a doctor?  There are too many variables and too many competing opinions of what makes a good one, which is why the market came up with money and prices.

If you sense a bit of begging the question in this explanation, you're right: the only way to assess economic value is by looking at what the market is willing to pay, and then working backward to try to figure out why the market values things the way it does.  Trying to pin a single number representing value on something based on deductive analysis is precisely why central planning fails.

[Jim Hyla]

But Keith, you didn't respond to my original comment at all. Just to that snippet that Trotsky cut out.::whistle::

He also didn't respond to some of my empirical evidence...

Busy morning people.  I grabbed the low hanging fruit.  Geeez...

Why exactly does there have to be a limit on how much the money changers mke compared to the laborers?  They make money based on their economic value they provide for their employers. Like it or not a bank exec produces more value on average than a garbage man or your average worker. So he gets paid more.  Certainly there are inefficiencies and transients - in a bad year the bank exec might effectively be worth negative dollars but on average it works.

I'm not immune to the emotional raction you get when you see some folks making absurd amounts of money.  It annoys me that the folks in legal at my company make a lot more than I do when they produce absolutely nothing of value (they don't build satellites). But when I think about it rationally I understand that they protect the company from potential losses and thus "produce" more than I do per capita.

I'm not comfortable with having any government or external body enforcing compensation limits. If a company wants to limit itself fine. But if it wants to pay exorbitant salaries then that's their right, or ught to be.

Looking at the chart there hasn't been all that much variation in Top 1% income share through the years. There was plenty of inequality in the 60s by this measure. I'd be real hesitant to say that the relative decline in this one metric was the reason (or an especially big reason) for the growth in that time period.

I do agree that there is an extreme where inequity can lead to severe problems (put the metric you cited at 99% for instance :-)). But what constitutes "moderate" is highly subjective. I don't have any problem with the levels we have today especially considering the immense wealth that we have in this society.

Keith, you don't feel that it's all based upon economic value, do you? When I went into practice, payment to MDs by insurance companies was based upon UCR. That stands for usual, customary, and reasonable. Now how do you think they got that basis? They looked at charges and set a reimbursement at some average of charges. So what do you do, each year you increase your charges to make sure the average goes up. That insures the UCR goes up, and you always make sure your charges are larger than what they'll pay, otherwise you don't get as much as what they're willing to give you. It had no basis in fact to what the services were worth.

If you look at many executive and board member compensation, it's very similar. You hire an agency to look at comparable company reimbursements, then they recommend your company reimbursements based upon that. Of course your execs shouldn't be at the bottom of the scale, so each year they go up, not based upon value. If they were only based upon value, why don't they lose when the company loses. As an example one of our regional supermarkets, P & C, recently went bankrupt and was sold off. A year or so prior to that, they sold off a profitable distribution business, "wanting" to focus on their core business. That year they gave themselves a hefty bonus, all while their core business was losing money. Prior to going under, did they cut their compensation? Hardly.

Although I don't have it on hand, I presume you've seen the chart of exec compensation as a function of worker compensation? Over the last few decades it has been rising off the chart. Executives make a hugely larger multiple compared to their workers than they ever did before. Have they really added that much value, or is it that everybody on their board, most of whom are execs themselves, just raise the bar?

[mnagowski]

Looking at the chart there hasn't been all that much variation in Top 1% income share through the years. There was plenty of inequality in the 60s by this measure. I'd be real hesitant to say that the relative decline in this one metric was the reason (or an especially big reason) for the growth in that time period.

I would think that a doubling in the amount of aggregate income "allocated" to the richest one percent of the population in the last forty years would constitute "significant variation. And I use the term "allocated" because that's exactly what happened -- tax and regulatory policies over the last forty years have become extremely beneficial to that segment of society.

There's no "immorality" associated with making an honest living.

You believe that Wall Street has been 'honest' over the last decade?

I've worked on Wall Street for the past 18 years and I certainly have been honest.  So have the two banks that I've worked for and my bank hasn't taken a dime of taxpayer money.  The VAST majority of bankers are honest people, don't paint us all with the same brush.

I think we have different definitions of honesty. And keep in mind that I'm labeling the structures and institutions on Wall Street as inherently dishonest, not any one person or group of people. I'm a banker myself. I work for a commercial bank and am always honest in my own work as well, but that doesn't mean that there aren't institutional or industry-wide practices or policies in place that strike me as fundamentally dishonest. You can start with a lot of the industry's accounting policies, for one.

In my mind, the ideal professional would never make a deal with a client or another party that they wouldn't make to themselves, or to their grandmother. This is an "honest" deal, if you will, that lives up to the Golden Rule. And I think plenty of professions operate with this principle in mind -- doctors, teachers, engineers, etc. Hell, even oil companies aren't going to price gouge their grandmothers, they'll just charge them the going market rate. (But Jim, let me know if you are charging your arthritis patients any more than you would want yourself charged.)

But if you look at the practices of the financial sector and Wall Street in particular, you see this principle falling apart pretty rapidly. The credit card industry is ripe with hidden fees (these thankfully are in the process of being regulated away) that you would never want to impose upon your grandmother. Until two years ago mortgage brokers were encouraging their customers to sign-up for products that they themselves wouldn't touch with a ten foot pole. And the Wall Street investment banks were eager to sell small town pension funds AAA-rated CDOs at the same time they were buying derivatives to bet against these CDO's performance. Or mutual fund executives that tout their high-fee, low-performance funds at the same time that they invest in index funds. In my view, these are all fundamentally unethical, dishonest practices due to the huge amount of information asymmetries at play and the abillity of the financial sector to exploit these asymmetries.

Now I know that certain posters on here will claim that my viewpoint is fundamentally naive, that this is a dog-eat-dog world and caveat emptor, and all that. But even if you don't agree with my assertion that businesses should abide by some notion of the Golden Rule, hopefully you can at least agree that when we have regulated the financial services industry more strictly in the past we have escaped a lot of the problems of the past decade without any significant fallbacks (e.g. economic growth rates were just as high, median household income was actually growing, etc.). Just look to your employer's home country: Canada.



Turning the discussion back to college sports, I think I was most struck by the outcome of the Penn-Brown basketball game this year, when Penn ostensibly won the game on the wrong call -- they scored after the buzzer sounded but it counted anyway. The fact that they refused to vacate their win (and that many posters on this board defended their decision) really struck a nerve with me, and I think it speaks volumes to just how morally and ethically bankrupt our culture has become. We all love the story of Cornell's fith down game against Dartmouth because Cornell did the right thing -- we treated others fairly, the way that we would want to be treated.  

But then I see that most of Penn's basketball starters are enrolled in Wharton, and I'm not exactly surprised. Win at all costs, I suppose, is what they teach them. Even if it undermines your community, your country, or your world in the process.

[Jim Hyla]

(But Jim, let me know if you are charging your arthritis patients any more than you would want yourself charged.)

Ohhh, it's so much different now. If only those days were here again.:-D After all, that's how all those highly paid specialists got to be where they are now.

[Roy 82]

Gosh. I love the off season.

Great discussion.::popcorn::

[KeithK]

Gosh. I love the off season.

Great discussion.::popcorn::

I HATE the off season. Especially when it starts before the second Saturday in April. But at least I'm grateful for the community of friends here at eLynah and the conversations we have all year long.

[French Rage]

Gosh. I love the off season.

Great discussion.::popcorn::

Yeah I just skipped the last dozen posts, I didn't miss anything did I?