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The fundamental fallacy here is that people respond purely to monetary incentives for work. This may be true for Mr. Mankiw, but it is not a universal truth.
by aarghh 16y ago
The fundamental fallacy here is that people respond purely to monetary incentives for work. This may be true for Mr. Mankiw, but it is not a universal truth.
- rythie 16y agoIf that were true wouldn't he just do the extra work for free, then he can take his pick of the very best/interesting jobs that way. The government would take most of it in tax anyway as he points out. Of course the downside to the government is that it doesn't get all that tax revenue. If a friend said to me, can you talk at this conference, I'll pay you $1000, but really money is tight and then I say I'll only get $100 of it out anyway - then I'm just going to say wave the fee aren't I? Assuming I want to do it. Or even just give the fee directly to charity? (at least in the U.K. this avoids tax)
- philh 16y agoI don't think anyone's making that assumption. The argument holds if people respond at all to monetary incentives for work. And if you find someone who doesn't respond at all to monetary incentives for work, they probably aren't making $250,000 a year, or anything close.