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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 obse

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.

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.