Saturday, May 16, 2015

Krugman: Broken windows and broken necks

Krugginator - broken windows and American oligarchy. An interesting idea, quote:

Some years ago I gave a talk to a group of businesspeople — I don’t remember the occasion — and afterward, during the drink and mingle part of the event, had a conversation about executive pay. Quite a few of the businesspeople themselves thought that pay had grown excessive, but what has remained with me was the explanation one guy offered, more or less seriously: it’s all the fault of Monday Night Football.

His story went like this: when games started being televised, the financial rewards to winning teams shot up, and star players began being offered big salaries. And CEOs, who watch a lot of football, noticed — and started saying to themselves, “Why not me?”

So, Kruggers, does that mean you take back all that mocking you aimed at Mankiw for his "defense of the 1%" article, where he scolded America for hating Robert Downey Jr.?

Now, this sounds ridiculous — surely huge historical changes must have deeper roots. But I found myself thinking about this conversation when reading this interesting post by Vera te Velde on tests of the “broken windows” theory, which says that people are more likely to break social norms if they see other people violating norms, even if there’s no direct connection — you grab handbags if you see graffiti, you litter if you hear people ignoring noise ordinances, etc.. As she notes, there is now overwhelming experimental evidence for that theory. So it’s not crazy to think that CEOs might start violating pay norms because they see quarterbacks getting big checks.

Sure but in the real world, where us moral actors live, we don't begrudge people working in high steel their massive paycheques, because they're doing something we don't have the guts to do. And so we don't ask for the same pay they get, because we're not working 50 stories up in the skeleton of a building with no net. We don't say "why does a Mohawk highschool dropout make three times what I get with my college degree"? We have enough perspective to know that that sort of talk is asinine.

Only an arrogant narcissistic sociopath can think that he deserves the same level of pay as a professional football player, who faces the real and significantly nonzero chance of ending his career with a blown knee, a broken neck, a broken leg, or (most often) a lifelong problem with post-concussion syndrome and prescription drug addiction. How many CEOs put their life on the line every week? None. Absolutely none. Believing they can be equated with football players is delusional.

The players in the NFL, also, are the only reason anyone buys tickets. Nobody is going to go to the game to watch the owner sit at a desk. They're the front line in the value chain - unlike CEOs, who nearly to a man (not sure about Steve Jobs) are producing utterly nothing of quantifiable value in their company, and often are simply parasites out to rob the shareholders of as much cash as possible.

This doesn't disprove broken windows theory: sure, you're probably right, Kruggers. Stunningly beautiful actresses and superhuman elite athletes are nowadays getting rich because of rare talent and superhuman genes; CEOs think they have rare talent and superhuman genes too, because they're narcissistic sociopaths, so they demand to be paid as much as Angelina Jolie or Alex Rodriguez. I can see that.

But that theory lets the CEOs off the hook for their mistaken belief that they're part of the value chain or being paid for risk. Or even their delusion that they're somehow superior to other people.

It also ignores the fact that other people are watching sports too: but the front-line workers have no ability to demand higher pay, saying "I'm easily as valuable to this company as Frazer McLaren and he makes $700k, so where's my raise?" In fact, the front-line workers have had all negotiating power stripped from them.

But the CEOs can just take what they please. They have the keys to the safe.

As well, Kruggers, note that you fix a "broken windows" situation by repairing all the broken windows. Are you saying, then, that we should pass a law limiting the pay of actresses and athletes? Why? Who should get the profit from the films and the games, if not them?

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