Monday, June 24, 2013

The Economist moves past...

...Steve Jobs and J. K. Rowling in the inequality discussion (again, my emphasis):

So why does Mr Mankiw pick three figures from the entertainment and computer industries, where everyone knows the "superstar" phenomenon is strongest? Because if he used examples from other industries, it would be even more difficult to convince the reader that the immense rewards being reaped by those at the top had anything to do with their unique contributions to the economy. Last year the highest-paid chief executive in the country, at $131m, was a guy named John Hammergren (above), who runs a medical and pharmaceuticals business called McKesson. If he hadn't been running McKesson, some other guy would have been. If Michael Vascitelli ($64m) hadn't been running Vornado Realty Trust, somebody else would have. Perhaps those other guys wouldn't have been as good at their jobs; in that case, these firms would have lost market share to competitors. So what?

The social purpose of high executive pay is to create incentives for hard work to maximize profit. But these guys are being paid double what their predecessors were making in the 1980s, which was not exactly a period known for its stodgy egalitarianism. Are we seeing startlingly better corporate performance today than we were back then? Is there greater productive innovation in, say, medical technology or commercial real estate? Is our economy growing faster? Are general standards of living rising faster? No, no, no and no. What public interest is served by the fact that these CEOs, as a class, are earning a multiple of what their predecessors did a generation ago?

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