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I fundamentally disagree with the ideas of this article and think it is a wrong and harmful way to go about the problems in banking. It will create a dangerous

I fundamentally disagree with the ideas of this article and think it is a wrong and harmful way to go about the problems in banking. It will create a dangerous precedence for other industry. The premise is based on a flawed homo-economomics understanding of human psychology. It is classical right-wing libertarian thinking, where the assumption is the only incentives driving people are greed and fear of punishment. These so called incentives are all stick and no carrot. People should be given a reason to do the right thing. Quite the contrary they are usually punished for doing the right thing. Whistle blowers have poor protection. Responsible employees get worse results than the reckless ones and thus get passed over on promotions or hounded by their managers. It would be much more effective to simple get rid of all the incentives designed to only measure financial performance and nothing else. Pay people to do a good job, rather than according to a narrowly defined metric of performance. The measurement based, new management style way of doing things has been poison everywhere in society not just banks. It causes police to arrest people just to fill their quota. Parking guards to write out tickets to meet target for number of tickets written by management. It makes hospitals push for unnecessary medical procedures. It is time to stop treating people like greedy robots, and actually accept that people are blessed with compassion and the ability to make complex decision. They will do that if you let them, rather than rewarding them for being reckless idiots.

carsongross 10y ago
Banking (and economics) selects for people driven by money more than other fields. It is not unreasonable to look to financial incentives and punishments to regulate people so inclined.
Pyxl101 10y ago
This is unrealistic. How do you measure whether someone "does a good job"? What if their job is to earn money while taking a certain amount of risk? This is ultimately what all banks do: all loans have a risk they won't be paid back, and the job of the bank is to earn money while managing that risk. I think if you tried to refine these ideas into something more specific and concrete, that would apply on a daily or yearly basis with respect to employee performance and compensation, you'd see that this idea needs to be a lot more fleshed out. You haven't considered how incentives play out at multiple levels in an organization or how to construct the right ones. There is no such thing as "just pay people for doing good work". The world doesn't have a ruler that can decree this and if it did there's still no way to enforce that it happens. You need to think about how to structure incentives for each person in the organization so that they shape behavior in the right direction. Personal liability is an incentive. "Pay people for doing good work" is not an incentive nor a policy that can be directly implemented. It is at best a goal that could be refined into policy and incentives after defining what exactly it really means. (What is "good work" and how do you know it when you see it?) The author of the article is advocating for creating a much stronger incentive to do the right thing by making people who work at banks personally liable for the outcomes of their decisions. The author specifically makes the point that people outside the system don't how to recognize "good work", but people within it do, and by making them personally liable, they will think twice before doing bad work.

carsongross 10y ago

Banking (and economics) selects for people driven by money more than other fields. It is not unreasonable to look to financial incentives and punishments to regulate people so inclined.

Pyxl101 10y ago

This is unrealistic. How do you measure whether someone "does a good job"? What if their job is to earn money while taking a certain amount of risk? This is ultimately what all banks do: all loans have a risk they won't be paid back, and the job of the bank is to earn money while managing that risk. I think if you tried to refine these ideas into something more specific and concrete, that would apply on a daily or yearly basis with respect to employee performance and compensation, you'd see that this idea needs to be a lot more fleshed out. You haven't considered how incentives play out at multiple levels in an organization or how to construct the right ones. There is no such thing as "just pay people for doing good work". The world doesn't have a ruler that can decree this and if it did there's still no way to enforce that it happens. You need to think about how to structure incentives for each person in the organization so that they shape behavior in the right direction. Personal liability is an incentive. "Pay people for doing good work" is not an incentive nor a policy that can be directly implemented. It is at best a goal that could be refined into policy and incentives after defining what exactly it really means. (What is "good work" and how do you know it when you see it?) The author of the article is advocating for creating a much stronger incentive to do the right thing by making people who work at banks personally liable for the outcomes of their decisions. The author specifically makes the point that people outside the system don't how to recognize "good work", but people within it do, and by making them personally liable, they will think twice before doing bad work.