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The standard story is that salaries have remained flat. I've seen some people claim to the contrary (e.g. Russ Roberts) but I think that's too complicated for a

by edanm 8y ago

The standard story is that salaries have remained flat. I've seen some people claim to the contrary (e.g. Russ Roberts) but I think that's too complicated for a non-economist like me to get at the truth, so I'll just stick to the general consensus here. There are some stories that make sense to me about where the increased productivity is going - into healthcare, into more leisure time, etc. But again, I'm not at all qualified to make any judgements here. > I'm not sure that people "with skin in the game" are really the best people to ask, since their justifications are likely to be local (as in, "our competitor is offering $X so we must beat that") without much insight into wider economic conditions. Well, kind of the basis for the whole idea of capitalism is that you can trust people to make local decisions that are totally selfish to them, without having to consider wider economic conditions, and that it will end up working out for everyone. The great value of capitalism, in my opinion, is that given appropriate conditions, this is usually true. It's not true in the case of some market failures, like monopolies, etc, but it's usually true. And in this specific case, again, it's totally in the interest of the people who have money, to give less of it to executives. Sure, there are lots of reasons why it's more complicated and people don't always behave in their best interest, but are you really so sure that this is the case here? Why? Why are people choosing to fork over extra money here, and what makes you think you can improve the economy by changing that?

lovich 8y ago
>The standard story is that salaries have remained flat. I've seen some people claim to the contrary (e.g. Russ Roberts) but I think that's too complicated for a non-economist like me to get at the truth, so I'll just stick to the general consensus here. No need to bring up this side note if you're not going to use it as an argument or back it up then >And in this specific case, again, it's totally in the interest of the people who have money, to give less of it to executives. As another poster stated elsewhere in this thread, the observed behavior of boards and executives negotiating has not been of two independent parties. The executives are now not only socially connected but have a direct incentive to constantly increase pay for their friends, so that their friends return the favor. This is not using the shareholders money well, but just quid pro quo favors that fuck everyone outside of this in group[1]. Capitalism doesn't just work unregulated because parties quickly acquire power and then subvert the rules of capitalism to funnel even more power to themselves. We are directly observing executives of modern corporations doing this via their web of board seats and increasing each other's pay ad infinitum at the expense of shareholders, employees, and society [1]https://www.wsj.com/articles/who-wins-when-ceos-sit-on-multiple-boards-not-investors-1506418202 https://www.wsj.com/articles/who-wins-when-ceos-sit-on-multi... https://en.m.wikipedia.org/wiki/Interlocking_directorate https://en.m.wikipedia.org/wiki/Interlocking_directorate
bambataa 8y ago
Well, to turn that around, what makes you sure that capitalism is working correctly here? With respect, you appear very reluctant to commit to any economic observation, yet also seem confident that basic Economics 101 applies to executive remuneration without allowing for other economic considerations (capture etc). For example, see [0] for a brief discussion of how executive pay may not be an efficient market. My own view is that neoliberal economic policies have led to workers having a lower share of economic output [1], resulting in an increasing share going to shareholders [2] and executives. As you say, it's totally in the interest of the people who have the money to give less of it to their workers. You're correct that I can't absolutely "know" that to be the cause, but then I don't know what makes you so confident that there is an efficient market for executives. [0] https://mainlymacro.blogspot.com/2014/01/understanding-ever-increasing-executive.html https://mainlymacro.blogspot.com/2014/01/understanding-ever-... [1] https://www.bls.gov/opub/mlr/2017/article/estimating-the-us-labor-share.htm https://www.bls.gov/opub/mlr/2017/article/estimating-the-us-... [2] https://www.macrotrends.net/1324/s-p-500-earnings-history https://www.macrotrends.net/1324/s-p-500-earnings-history
- edanm 8y ago
  Thank you for the thoughtful and respectful comments! I'm afraid my answer is a bit long, sorry! :) > Well, to turn that around, what makes you sure that capitalism is working correctly here? Well, I don't know that. I tend to assume that economics is usually true, or is at least a good approximation, because it usually is in my experience (or, more importantly, according to most economists). Or better yet, let me make a more specific claim which I think better reflects my belief - I assume that in most markets, there are problems. No market truly approximates Econ 101 style free markets- because of sticky prices/wages, information asymmetries, human psychology being tricky, etc. However, I think a) the differences are usually minor and self correcting over the long run, and more importantly, b) it's often hard to interfere in a way that fixes the problems without messing things up more. In other words, yes, maybe executive compensation is not perfect and is in a bubble or some such thing - however, I hesitate to think anyone on the outside can know if that's true or not, and "fixing" it without messing things up is hard. Moreover, I think the focus on executive compensation is mostly meaningless anyway. It's not like an executive making a few extra millions is what costs employees their salaries, not usually anyway - in most large companies, where this discussion is relevant, we're talking small amounts of extra money per employee anyway. Really, the reason most people focus on this is because it's flashy. It makes good headlines and political punchlines to talk about executives making millions - I highly doubt most people have truly done any of the actual work necessary to understand whether they really are "overpaid" or not. (As opposed to shareholders, who I relatively trust because it's in their interest to do the work, and they have no interest in making political points, only in earning more money). > My own view is that neoliberal economic policies have led to workers having a lower share of economic output [1], resulting in an increasing share going to shareholders [2] and executives. As you say, it's totally in the interest of the people who have the money to give less of it to their workers. Yeah, that's obviously in their interest. Personally I think if we want to help workers, we should be doing something like UBI or welfare or similar - we shouldn't be forcing companies to make sure that some employees have enough, we should be collectively making sure everyone has enough. I don't think it's morally right, or economically efficient, to force companies to bear that burden (and only for their employees) - I think that's an old school "paternalistic" view of employer/employee relations which is no longer relevant.

by edanm 8y ago

lovich 8y ago

>The standard story is that salaries have remained flat. I've seen some people claim to the contrary (e.g. Russ Roberts) but I think that's too complicated for a non-economist like me to get at the truth, so I'll just stick to the general consensus here. No need to bring up this side note if you're not going to use it as an argument or back it up then >And in this specific case, again, it's totally in the interest of the people who have money, to give less of it to executives. As another poster stated elsewhere in this thread, the observed behavior of boards and executives negotiating has not been of two independent parties. The executives are now not only socially connected but have a direct incentive to constantly increase pay for their friends, so that their friends return the favor. This is not using the shareholders money well, but just quid pro quo favors that fuck everyone outside of this in group[1]. Capitalism doesn't just work unregulated because parties quickly acquire power and then subvert the rules of capitalism to funnel even more power to themselves. We are directly observing executives of modern corporations doing this via their web of board seats and increasing each other's pay ad infinitum at the expense of shareholders, employees, and society [1]https://www.wsj.com/articles/who-wins-when-ceos-sit-on-multiple-boards-not-investors-1506418202 https://www.wsj.com/articles/who-wins-when-ceos-sit-on-multi... https://en.m.wikipedia.org/wiki/Interlocking_directorate https://en.m.wikipedia.org/wiki/Interlocking_directorate

bambataa 8y ago

Well, to turn that around, what makes you sure that capitalism is working correctly here? With respect, you appear very reluctant to commit to any economic observation, yet also seem confident that basic Economics 101 applies to executive remuneration without allowing for other economic considerations (capture etc). For example, see [0] for a brief discussion of how executive pay may not be an efficient market. My own view is that neoliberal economic policies have led to workers having a lower share of economic output [1], resulting in an increasing share going to shareholders [2] and executives. As you say, it's totally in the interest of the people who have the money to give less of it to their workers. You're correct that I can't absolutely "know" that to be the cause, but then I don't know what makes you so confident that there is an efficient market for executives. [0] https://mainlymacro.blogspot.com/2014/01/understanding-ever-increasing-executive.html https://mainlymacro.blogspot.com/2014/01/understanding-ever-... [1] https://www.bls.gov/opub/mlr/2017/article/estimating-the-us-labor-share.htm https://www.bls.gov/opub/mlr/2017/article/estimating-the-us-... [2] https://www.macrotrends.net/1324/s-p-500-earnings-history https://www.macrotrends.net/1324/s-p-500-earnings-history

edanm 8y ago
Thank you for the thoughtful and respectful comments! I'm afraid my answer is a bit long, sorry! :) > Well, to turn that around, what makes you sure that capitalism is working correctly here? Well, I don't know that. I tend to assume that economics is usually true, or is at least a good approximation, because it usually is in my experience (or, more importantly, according to most economists). Or better yet, let me make a more specific claim which I think better reflects my belief - I assume that in most markets, there are problems. No market truly approximates Econ 101 style free markets- because of sticky prices/wages, information asymmetries, human psychology being tricky, etc. However, I think a) the differences are usually minor and self correcting over the long run, and more importantly, b) it's often hard to interfere in a way that fixes the problems without messing things up more. In other words, yes, maybe executive compensation is not perfect and is in a bubble or some such thing - however, I hesitate to think anyone on the outside can know if that's true or not, and "fixing" it without messing things up is hard. Moreover, I think the focus on executive compensation is mostly meaningless anyway. It's not like an executive making a few extra millions is what costs employees their salaries, not usually anyway - in most large companies, where this discussion is relevant, we're talking small amounts of extra money per employee anyway. Really, the reason most people focus on this is because it's flashy. It makes good headlines and political punchlines to talk about executives making millions - I highly doubt most people have truly done any of the actual work necessary to understand whether they really are "overpaid" or not. (As opposed to shareholders, who I relatively trust because it's in their interest to do the work, and they have no interest in making political points, only in earning more money). > My own view is that neoliberal economic policies have led to workers having a lower share of economic output [1], resulting in an increasing share going to shareholders [2] and executives. As you say, it's totally in the interest of the people who have the money to give less of it to their workers. Yeah, that's obviously in their interest. Personally I think if we want to help workers, we should be doing something like UBI or welfare or similar - we shouldn't be forcing companies to make sure that some employees have enough, we should be collectively making sure everyone has enough. I don't think it's morally right, or economically efficient, to force companies to bear that burden (and only for their employees) - I think that's an old school "paternalistic" view of employer/employee relations which is no longer relevant.