TPMCafe
« Power, Not Cash: A Promising Moment for Organizing in the Democratic Party | Home | See "Stop-Loss" And End This Damn War »

Merit Once Again...

user-pic


Jared Bernstein writes:

Let me be, I hope, totally clear: for Brad, Alan, and any other economist, merit=marginal product. Thus, principle one is very simply arguing that while a central tenet of economics is that your income is equal to the marginal value you add to the economy, reality is otherwise. Your bargaining power—your ability to claim more than your marginal product or get stuck with less—is an ever-increasing determinant of economic outcomes.

But I am not really a real economist! I am an ex-interdisciplinary social science major who thought it would be fun to become a professor, and figured out in time that the job market for young economists was booming while that for history and poli sci Ph.D.'s was totally cr---- out! (And there was my freshman roommate Larry, who had found this brilliant and charismatic young MIT professor--think of the professor in the movie "21" with hair, with youth, and without the evil.)

I think it is a bad long-run mistake to associate "merit" with "marginal product" and to talk about how various political and sociological frictions drive wedges between market incomes and "merit." Politics and sociology profoundly shape marginal products by shaping factor supplies and who gets the income that then shows up as demands.

After all, the outsized compensation packages of CEOs are quite likely close to their marginal products--organizations like Blackstone pay as much when they hire a CEO for a private equity company as the market pays the CEOs of publicly traded firms. But I don't think that it is right to say that their immensely higher wealth than that of their near-peers is due to immensely higher merit.

And remember the Bengal famine of 1942--war interrupts the trade routes, so millions of landless laborers' marginal products fall to zero because there are no markets for the staple export crops they grow for their landlords. But nobody would say that they "merit" their zero incomes and so their deaths by starvation...

I prefer to take my stand with Gandalf the Grey, and say that "merit" and "desert" are not proper guides to what things and opportunities one should have, or what one's destiny ought to be: "'He deserves death!' 'Deserves it! I daresay he does. Many that live deserve death. And some that die deserve life. Can you give it to them? Then do not be too eager...'"


10 Comments

| Leave a comment
user-pic

. . . organizations like Blackstone pay as much when they hire a CEO for a private equity company as the market pays the CEOs of publicly traded firms.

It isn't the market that pays CEOs "outsized compensation packages." No; its the legislature of the State of Delaware that does that.

Facebook

This is a smart blog. I mean it. You have so much knowledge about this issue, and so much passion. You also know how to make people rally behind it, obviously from the responses. Youve got a design here thats not too flashy, but makes a statement as big as what youre saying. Great job,children health indeed.

I don't think CEO pay has a thing to do with their marginal product. If they can just keep out of jail, they're walking away a multimillionaire whether the company made money or lost.

CEO pay is as John Kenneth Galbraith described it: in the nature of a warm personal gesture to oneself.

Facebook

Thanks for your patience and sorry for the inconvenience!

Best regards, Mary CEO of youtube video converter

Another person confused about the social construction of markets. Sure the markets as designed by greedy CEOs will pay CEOs obscene amounts. These are not "natural markets" they are deliberately constructed ones.

And please, would the economists stop talking about morals, it makes me want to puke.

Facebook

religious sect may degenerate into a political faction,' wrote James Madison, but the new American nation would nevertheless be protected against the ungovernable combination of religious fervor and political power as long as the Constitution prohibited the federal government from establishing any particular creed as preeminent.
Egitim | Chat

Facebook

Madison believed that we should have separation of church and state throughout the land, federal and local. There was a fascinating moment during the congressional debate over what became the First Amendment. How could the beloved First Amendment be harmful to religion? Huntington feared that it would overturn or interfere with Connecticut’s approach, which was to have state-supported religion.
Chat | Chat

Facebook

Are you good until this issue thanks admin.
Chat | chat

Facebook

This information is very useful! Thanks!
Best regards, Katya, CEO of microsoft hyper v server, free iscsi target for windows

Facebook

Si vous etes interesses par le dossier, ou desirez en savoir plus, contactez-moi par mail, et je vous mettrai en contact.
Best regards,Jane, CEO of high availability clustering

Leave a comment

Advertisement
Please disable your adblocker!
Ads are how we pay the bills!

Subscribe

The Coffee House
TPMCafe's regulars

House Brew
From Your Cafe Editor

Special Guests
Big names and big brains

Special Features
Pressing topics and trends

Table for One
An expert's week-long talk.

All Reader Posts
TPM readers discuss.

Advertise Liberally
Share
Close Social Web Email

"To" Email Address

Your Name

Your Email Address