W-2 review

Severian (in a comment at Freeberg’s) describes someone you also might know:

I have a good friend who, like all liberals, wants “Wall Street” to be “regulated.” I tried the old “which specific regulations would you like?” bit and he came back with stuff about executive compensation. Sad, but not surprising, since “not understanding how the labor market works” is just one phase of the grand liberal project of misunderstanding everything about basic economics until the end of time.

What was surprising, though, was his total lack of even the most basic financial knowledge. I’m not talking about the ability to price derivatives or discuss credit default swaps; I’m talking basics — as in, he really couldn’t understand how, if I bought a share of stock at $1 and sold it for $3, someone somewhere wasn’t getting screwed out of $2.

Although he’d happily tax you on that $2.

Executive compensation is based on the uncomplicated concept of “What can we get away with?” Always has been. TARP sought to correct this by imposing salary ceilings on recipients; recipients busted a nut to pay back TARP as quickly as possible to get out from under those ceilings. (This is an example of the Law of Unintended Consequences, Serendipity Subclause: it’s not common, but occasionally something stupid produces an acceptable result, or at least a result that wasn’t as bad as you could have predicted.)

Besides:

I doubt that Alex Rodriguez, for example, really generates $300 million or whatever in revenue for the Yankees. But as a conservative I know that free markets include the right to make stupid decisions in the marketplace.

Or it could simply be that A-Rod is worth that much to the Yankees just to make sure he doesn’t fall into the hands of the [fill in name of hated rival team, probably the Red Sox].

There was a discussion locally to the effect that NBA players could not possibly be worth the amount they get. (The lowest-paid player on the Thunder roster, reserve forward D. J. White, makes $1,108,680 a year, and Oklahoma City is not known for overpaying people.) In vain it was argued that these dollars go to extremely few people — the NBA has no more than 450 roster spots — that the highest-paid players got that way because of perceived superiority, and that those salary levels exist because of collective bargaining between team owners and the Players’ Association. “Too high,” insisted the hardliners. I’m guessing they subscribe to the theory that at some point you’ve made enough money, and I infer that it’s okay with them if Washington tells you so — until the time that Washington tells them so, anyway.

For the record: I don’t really give a flying fish how much (or how little) someone is paid, except in the specific instance that “someone” = “me.” If some hedge-fund manager pulls down nine digits, how does that affect me in the slightest? If the answer is “Well, he doesn’t deserve that kind of money,” the only proper response is “Sez who?” Eventually, you find out who: what they want, evidently, is some sort of Federal Compensation Board, where “appropriate” salaries are determined, and from whom they presumably expect a raise, inasmuch as they’re so deserving and all. This is a slight variation on a theme previously noted by social critic Steve Sailer:

The most heartfelt articles by female journalists tend to be demands that social values be overturned in order that, Come the Revolution, the journalist herself will be considered hotter-looking.

As a rule, there are only two types of elitist: those who are part of an elite and believe they deserve to be, and those who are not part of an elite yet believe they deserve to be. And you can take that to the bank.





3 comments

  1. Francis W. Porretto »

    3 January 2011 · 5:10 am

    I doubt that Alex Rodriguez, for example, really generates $300 million or whatever in revenue for the Yankees. But as a conservative I know that free markets include the right to make stupid decisions in the marketplace.

    That’s a typical response from a conservative who isn’t an economist. An economist would cluck and say, “Not so fast, Murgatroyd. The decision to pay Alex Rodriguez a bazillion bucks is made in a specific context, not in isolation. The context could well be more important than the contributions of the individual player.” (See also ”network effects.”)

    Also, the Steinbrenners’ reasons for paying A-Rod enough to buy his own continent might not be based entirely on his incremental contribution to Yankee victories. For example, most of his career, Derek Jeter was paid not-a-whole-lot-less, though his offensive numbers never approached A-Rod’s. Jeter, as the saying goes, “put preteen girls in the stands” – and not for the reason David Letterman might have in mind.

  2. Jeff Brokaw »

    3 January 2011 · 8:17 am

    Chaz – you’re getting to be a bit of a policy wonk these days! I’m enjoying it, myself.

    I firmly believe that if there is ONE thing that all adults must understand, especially voters, it is basic economics and free markets. The number of people who enjoy the fruits of the efficiency of free markets yet advocate against them is friggin’ huge. Can you say “irony”? Knew you could.

  3. Charles Pergiel »

    3 January 2011 · 4:05 pm

    I find the reports of people making zillions of dollars disturbing (or angrifying or whatever). But the key is that somebody agreed to pay them that much. Whatever kind of job you do, the job doesn’t pay you any money at all. Some person pays you. Generally the payee knows what they are doing (if I pay each of a dozen guys ten million smackola’s, and they each kick back a million bucks to me, I’ll be twelve million to the good, and 3 million more than each of them).

    Corruption is rampant. In sports there is at least some accountability.

    Yes, I’d like to have more money, but not if I actually have to do anything for it.

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