Ludicrously high wages are an opportunity, not a problem.

[Donald Ian Rankin]

The only problem is that the opportunity is not being taken.

If you are in certain businesses - sports, investment banking, entertainment, and generally most of the others with staggeringly high wages - then the difference between your expected profit if you employ the best and the second best - or the 193rd vs 194th best, for that matter - may be very large indeed, and so the best way of stewarding your investors/shareholders/own money may well be to spend a surprisingly large amount of it salaries.

People who ask "what are they doing to deserve it" are missing the point - a film star or a CEO or a sportsman is paid that much not because they deserve it, but because it is most profitable for the person paying them to offer that much*.

This is not, in itself, a problem with society - demand economies work, command economies don't, plain and simple.

The problem with society only arises if you don't tax that wealth at a sensible level.

A society where 9 people have one fish and the 10th has twenty has the potential to be a better society than one where everyone has two fish - there are more fish in total, and hence with a sensible taxation policy everyone is better off. America's problem is *not* unequal wages, it's that it has not got a sensible taxation policy to respond to those wages.

The great thing about immensely wealthy people is that you can tax them a lot without making their lives very much worse. But that opportunity is not being taken.



*Or rather, because the person paying them thinks it is.

[Xipe Totec]

1. It seems to me that these jobs are ripe for outsourcing overseas....

If you really want to reap the benefits of cheap overseas labor, then outsource the most expensive jobs first...

[Honeycombe8]

2. So true.

Some people don't link this basic principle to themselves. We all participate in this capitalism.

If you come to have, say, one of Elvis' jumpsuits, then you've got something that's worth a lot. So...can you sell it on Ebay to the highest bidder? If you do, that's capitalism. It'll sell for a lot, not because it's a wonderful jumpsuit (altho it might be), but because it's Elvis' jumpsuit, and it is the only one. Anyone who wants it will have to outbid others for it. So you get paid a whole bucket o' money for a silly jumpsuit that many others want so badly they're willing to pay through the nose for it.

Same thing with movie stars. Cruise and Dicapprio get paid a lot because most people in the world will pay to go see them in a movie. They may not pay to go see Charlie Smith, although Charlie Smith may be as good an actor and as good looking as Cruisse and Dicapprio. Charlie's not WORTH less as a person, but to a production company, Cruise and Dicapprio are worth MORE as sources of profit. That's capitalism.

I read a story about a college professor who conducted a test in his economics class to demonstrate capitalism vs. communism. For their first test, the professor gave everyone the grades they made, then told them for the 2nd test, he would average all the grades, and give everyone the average grade. The students made similar ACTUAL grades on their 2nd test that they had on their first, but everyone got a B, which was the average grade. For the 3rd test, the previously highest scoring students scored lower because they didn't study as hard to make a good grade. Their reasoning was..why study hard? Even though I should get an A, I will get a lower grade, anyway. So the AVERAGE grade for the class for the 3rd test was a C. And so on...the average score declined, as more students studied less. The lesson: People will not exert more effort than necessary, if they don't reap the reward for it. Consequently, the production for the whole group declines.

[kurt_cagle]

4. But carry the exercise a few more steps

The second test everyone gets a B. The third test everyone gets a C, because of the belief that the people at the top of the class don't have to study as much. However, after that third test, there's the realization that if things continue on its present course, everyone will flunk the test. This is an example of a negative feedback. Those who want to get an A in the class realize that the only way that they will end up doing so is to help those people who are scoring poorly on the test understand better. This means that over time what will happen is that the score for the class as a whole will likely find an equilibrium point, because there are those that want to get out of the class with a good grade. It also means that those students who are either in over their heads or are simply unwilling to make the effort may very well drop out through pressure from those who do want to be in the class.

This also highlights a second effect - there is never just one form of economy. In a communal economy, the person who consistently gets an A will become very much protected by the rest of the class, because she is both more likely to understand the material and on average will contribute to a high grade. On the other hand, those that consistently flunk will be initially helped, but will ultimately be ostracized if that help is rejected or has little impact. This means that a second reputation economy emerges orthogonal to the first. Capitalism has only one real metric - how wealthy you are compared to others. Moreover, in a fractional reserve economy, it is harder to gain wealth up to a certain point but once beyond that point wealth usually tends to accumulate on its own.

In a reputation based society, on the other hand, the degree to which you contribute to the betterment of society - either by pushing the limits of what's known, creating works of art or insight, entertaining others, teaching others, providing services to protect or help others or similar "A" level works tends to reward you for your skill, talent and perseverance, while those who steal, ruin others financially, cause physical harm or mental distress tend to be the "F" students. Most people tend to be somewhere in the middle - their lives neither improve nor detract from the lives of others.

I'd argue that we're on the edge of being able to have such a society - and that society is not capitalistic in the slightest. This is terrifying to the proponents of the status quo, which is largely built upon the notion that money by itself is the only thing that matters in an economy. So, I'd be careful of jumping to conclusions about better systems until you have a larger dataset to work from.

[Donald Ian Rankin]

5. I don't think that's what would happen at all.

I think that far more likely outcomes are that the more able students would a) drop the class, or b) focus their efforts on subjects where studying hard yields a better return, and pull up their average that way.

"Help those people who are scoring poorly on the test understand better" isn't a good approach. For one thing, the people doing badly are no more motivated to do better than the people doing well - after all, their effort won't be reflected in the outcome either. Also, universities come equipped with many opportunities to learn; assistance from one's peers is useful but by no means vital, and won't turn that many people's marks around.



>It also means that those students who are either in over their heads or are simply unwilling to make the effort may very well drop out >through pressure from those who do want to be in the class.

I think this is very unlikely - those students will stick like barnacles, because that class will be giving them a better grade than any of their others, with less work. The ones who will drop out are the ones who can get good grades elsewhere. I suppose it's possible the others may be able to bully them out, but do we really want to encourage bullying?


>In a communal economy, the person who consistently gets an A will become very much protected by the rest of the class, because >she is both more likely to understand the material and on average will contribute to a high grade.

If we *do* encourage bullying, it's more likely that those students will be bullied to stay and to work hard than that they'll be supported.




If we now step back from the school class analogy and look at what actually happened in communist vs capitalist societies, we can see that it matched my predictions much more closely than yours.

[Honeycombe8]

7. Capitalism isn't evil in and of itself. If you want to get paid "what you are worth," then you are

a capitalist. There's nothing wrong with wanting to sow what you have reaped. If you studied hard so that you could excel in class and get an A or B, that is a positive thing, and you would justifiably, IMO, be deserving of your grade. Your job is not to tutor everyone else in teh school. If you did, you wouldn't have time to study.

What we have now is a corrupted capitalism...where corporations are buying influence. So it's not true capitalism. Exxon doesn't have to compete because we subsidize it. Exxon also isn't the only one to suffer the consequences of a spill. In other words, it reaps all the benefits, at taxpayers' expense, but doesn't suffer all the losses. It's a lose-lose for those who don't have the $ to buy influence.

Canada, Sweden, the U.S., Switzerland, Germany, France, Mexico, Italy, etc., etc.....most countries in the world have a capitalistic economy, don't they? And yet, they are all very different.

If you think about yourself....if you work 40 hours a week, and your employer tells you that I, your co-worker, will be taking off 10 hours a week because of some illness or family emergency, and you have to work my 10 hours for no extra pay or benefits, and on a more or less permanent basis, I suspect you'd get a new job asap. Communism is "from each according to his ability, to each according to his need." So you're able to work 50 hours, but I'm able to work only 30; therefore, you have to work the 50, but we get paid the same. You have the ability....I have the need.

[Donald Ian Rankin]

8. Depends what you mean by "worth", but for most definitions I disagree.

Capitalism is where you get paid what your *work* is worth. I don't believe that a CEO is n hundred times a better person than an assistant nurse, but I do believe that their work can produce n hundred times as much more* profit for the person paying them.




*The relevant question is not "how much value does this person's work produce" but "how much more value does this person's work produce than would be produced by someone I could employ for less".

[Nikia]

6. How about a curve where the top person get an A

The next 10% get a C. The next 40% get a D and the rest fail a class. That would be rather discouraging too.

[kurt_cagle]

3. Nope

If the first person has ten fish, everyone else has one fish, and your minimum necessary diet is 1.1 fish, then you have a problem. The person with the ten fish has leverage that no else does. They can choose to give three or four fish to the hot looking girl or their best friend, and not give anymore to anyone else. They can pay someone to act as a guard with a fish or two in order to steal from someone else, leaving him with more fish. If the government is based upon one fish one vote, then the man with ten fish is king.

If the government is external, then the person who has ten fish really doesn't have ten fish. He has two (actually 1.9), and the remainder are simply in his proximity.

The problem is actually considerably more complex. People with large accumulated wealth have power that is disproportionate to their numbers. They can disproportionately influence elections, which means that after a while, their political bias ends up becoming the political bias of the government. This means that they can control how many fish they are taxed by in comparison to everyone else.

Government is not a thing. It is a process. It's a machine that has an internal state that changes with time (and more properly, it's a system that evolves its internal state over time, but that's a little too complex an analogy). The misconception that most people have (on the left and the right) is they don't appreciate this subtlety, instead, imbuing government with a single intelligence, but at the end of the day it comes down to what the man with the fish will do with his fish, and what everyone else with their fish will do (and what happens after each of them do something).

[Major Nikon]

9. Two sides of the same coin

If my income is being taxed 15% instead of 35%, that's 20% more money I have to buy even more investments. So if you are a wage earner and you have disposable income to invest, you are at a huge disadvantage, especially when you consider that your first $100K or so is also taxed at 7.65% (or twice that if self employed) more than someone who has only investment income. This means that someone with investment income only will accummulate wealth much faster than anyone who works for wages.

The deck is stacked heavily in favor of folks like Romney, compared to the lower class, the middle class, and even the upper middle class. If most of the GOP's consituency were smart enough to realize this, they should be as pissed as everyone else.