James Wickham: One convenient justification for high pay is that the more people are paid, the harder they work and the greater their output will be. Ok but only up to a point...
The banking crisis is sometimes said to have been caused by bankers having the wrong incentive structure: they were rewarded for short term gains and encouraged to take excessive risks. Arguably something more fundamental was involved. After a certain point, the gain from higher pay may actually be negative. We could call this relationship the Madoff curve after a well-known American entrepreneur. Consider for example doctors: after a certain point paying doctors (and especially surgeons) more money probably attracts people into the profession who simply want to make more money rather than having any commitment to healing people.
Mrs Thatcher claimed that 'Greed is good'. By contrast, Max Weber, the German sociologist, wrote that it should be taught 'in the kindergarten of cultural history' that modern rational capitalism has nothing to do with greed. Maybe part of our problems is that in the last twenty years capitalism has increasingly become equated with greed, in other words, with immediate short term gains? Clearly we have become accustomed to thinking that the only possible reward is monetary reward, denigrating the rewards of public esteem. Hence the absurdity of government ministers and very senior civil servants demanding parity with the private sector. Traditionally in democracies such people have been rewarded with a modest salary and public respect for public service. Pay them more, and you get less (or people who behave like bankers, which probably is the same thing).
3 comments:
Interesting, James. But do you see the current absence of public esteem for public service as a cause or consequence of the culture of 'greed is good'? Or have the two been mutually reinforcing in the post-Thatcher period?
This is an interesting post. I have long thought this about politics - on the one hand, it's a very important profession and we want to attract good people. On the other, surely the people who wouldn't be in politics if it weren't for a big salary probably aren't the kind of people we want. (A bit like Gore Vidal: "Any American who is prepared to run for president should automatically, by definition, be disqualified from ever doing so.")
I don't think it applies as well in the private sector as for politicians and senior public servants, but no doubt it does have some relevance.
If you think about standard business practices and corporate institutional structure these days, where the only ethos is the bottom line as per statements by Milton Friedman, it's no surprise that its best performers have a sociopathic streak. One has to be ruthless and unempathetic to make the decisions that corporations do routinely. Add the salary and it's veritably a magnet for that psychological profile.
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