Tuesday, March 28, 2006

Are you a liberal?

On some political questions I find myself agreeing with conservatives about goals but disagreeing about methods--on others it's the reverse. One example of the latter (agreeing with methods but disagreeing about goals) that comes to mind is that of freakishly overpaid executives. I read in a NYT article that the current CEO of Pfizer, whose stock price has fallen significantly, stands to receive close to $60 million in compensation next year. This is grossly immoral--but it's not something that should be legislated or punished. Instead, we should create a culture from the inside in which such an executive is ashamed to be paid that much when his lowest paid worker gets so much less.

The top tax bracket in America is 35% right now, much lower than in some other industrialized Western countries. That seems to me to be about right. (While I'm open to lower top tax rates, other parts of the system would have to be fixed first. Read this post and my response to it for more on that.)

The CEO of Whole Foods receives a salary of $342,000, 14 times the employee average; its lowest-paid workers make $13.15 an hour. Is that totally great? Yes. Should we try to legislate our way there? Probably not. I bet Whole Foods workers are healthier, more productive, and work there longer than at many other similar companies. If it's a profitable company others will follow suit.

Minimum wage is a tougher issue. I'll make this argument: if there should be a minimum wage, it should be higher than it is now: $5.15, and last raised in 1996. WTF?

24 Comments:

At 6:25 PM, Blogger Mair said...

I'm just wondering how exactly this will happen:

"Instead, we should create a culture from the inside in which such an executive is ashamed to be paid that much when his lowest paid worker gets so much less."

I totally agree that the CEO of Pfizer making $60 million is grossly immoral. (especially because Pfizer is such an immoral company anyway! but, that's another topic.) I'm just wondering what your ideas are for how to create this culture of which you speak.

oh...and there's been this big campaign here from some group of college kids to increase the minimum wage for Uva to $10.72.

 
At 10:38 PM, Blogger Jackscolon said...

One quick comment- the short term movement of a stock price is a result of "perceived value" by the market and has little to do with the overall health of the company.

The price of Pfizer stock has plummeted because one of their best selling products in ending its normal cycle. In the long run, it isn't a big deal. Pfizer made eight billion dollars last year, and has plenty of drugs in the pipeline. The company makes gobs of cash, and will make gobs more in the future. Instead of complaining, stockholders should be doubling their bets.

However, people (like you here) assume that the worth of CEO is directly tied the short term value of a stock. This is completely wrong in every sense, and is the cause of Worldcom, Enron, and other corporate disasters. Ceo's see that they are valued based upon meeting irrational analyst projections, and manipulate finanical data to delay the inevitable correction of a stock price.

Are CEO's worth that much? On average probably not, but certain ones are. Is Steve Jobs worth $60 million to Apple? Hell yeah, and then some. Is some idiot janitor worth more than $5.15? Not really, I'm pretty sure you can train a monkey to run a floor buffer. Is it fair that companies spend millions upon millions of dollars looking for their own Steve Jobs? If you look at it in the sense that the right person could make the company BILLIONS of dollars more profitable, than it is totally worth it.

I'm against minimum wage hikes though, for one reason: France. I think it is better to be a worker in a corporate world than unemployed in a worker's one.

 
At 10:40 PM, Blogger Jackscolon said...

and about UVA- I totally support those kids, provided their willing to pay double on their tuition.

 
At 8:49 AM, Blogger CharlesPeirce said...

That was one of my points--I DON'T think that a CEO's value/paycheck should be tied to a company's stock price. I was merely noting that it had fallen--I didn't say "the CEO of Pfizer is getting a billion dollars despite his causing the crash of its stock."

"Are CEO's worth that much? On average probably not, but certain ones are."

I'll take that. I do think shareholders let themselves get intimidated by top brass, though--what do you think about that?

 
At 10:29 AM, Blogger J. Morgan Caler said...

jackscolon asked this question:

"Is Steve Jobs worth $60 million to Apple? Hell yeah, and then some. Is some idiot janitor worth more than $5.15? Not really, I'm pretty sure you can train a monkey to run a floor buffer."

I used to think that corporations were inherently immoral because they were definitionally amoral. I have significantly changed my mind about that. I am pretty sure, now, that corporations are first and foremost institutions that actively develop, advocate, and enforce a morality that is all there own. The best-selling product from every major corporation is a moral code that is primarily economic.

Framing the question, as you did, in terms of “worth” is a moral judgment. The criteria by which you determine the answer is a moral judgment. I think Charles asked a question using a very different type of public morality than you used to answer it.

I am just wondering if citizens in a democratic republic can have, as their public form of deliberative morality, one that is economic in nature.

Do you think that works or do you think that it faintly smells of subversion?

 
At 10:58 AM, Blogger RedHurt said...

I don't think it's possible to create a culture where the executive is ashamed to make so much more than his lowest paid employee.

I don't think executives salaries are ever moral or immoral - the immoral part is the way they treat their other employees. I mean, if Pfizer pays it's CEO $60 million, but paid their grunts $25 an hour, we wouldn't be so upset, right?

Are these things connected? Absolutely - I just don't think it's a clear cause/effect relationship.

I believe that most of our economic constructs, from capitalism to advertising to minimum wage to taxes, aren't inherently good or bad. They're tools to promote freedom of commerce in our society, and they're only moral or immoral in the ways we use them. Abuses of power by CEOs and corporations make the news because their immoral choices affect so many peoples lives, but are their individual actions any more "wrong" than the employee who cheats on his/her timecard, makes long distance calls from work, or steals office supplies?

 
At 11:27 AM, Blogger CharlesPeirce said...

Thanks, everyone. Let's do this.

mair: I don't know how to create that culture. If I ever ascend to the top of a major corporation, I'll adopt a Whole Foods approach. That's all I can think of right now.

j. morgan: thanks for the analysis. What should our public morality be? Communitarian?

redhurt:

"Are their individual actions any more "wrong" than the employee who cheats on his/her timecard, makes long distance calls from work, or steals office supplies?"

Yes. Way more wrong. You said it yourself--they affect so many more people.

There's a conservative premise inherent and left implicit in discussions like this, which j. morgan was starting to get at. It says that I can't judge economic matters morally--if a CEO is paid a certain amount, it's sort of neither right nor wrong; the market just happened to set his or her salary there.

I think that's preposterous--how are we to cease being moral agents when we approach economic matters? I already made the point that I don't advocate legislating or taxing our way out of this, so you can't accuse me of attempting to stifle business growth, or something like that.

Either the inequality in income distribution in America is a problem, or it isn't.

 
At 2:41 PM, Blogger J. Morgan Caler said...

To put it another way, Redhurt argued that

“I don't think executives salaries are ever moral or immoral - the immoral part is the way they treat their other employees. I mean, if Pfizer pays it's CEO $60 million, but paid their grunts $25 an hour, we wouldn't be so upset, right?”

I think we should try to distinguish between exploitation and inequality. Redhurt, you are getting at exploitation here (where the CEO takes home a big check at the expense of his or her employees), Charles is getting at inequality (where the CEO takes home a check that is so big that, even though his or her employees are compensated well, the gap between two persons is ever increasing).

As Charles said, “Either the inequality in income distribution in America is a problem, or it isn't.”

Now, I was trying to argue earlier that economics is not just an analytical system, but a morality. So, when Redhurt says

“I believe that most of our economic constructs, from capitalism to advertising to minimum wage to taxes, aren't inherently good or bad. They're tools to promote freedom of commerce in our society, and they're only moral or immoral in the ways we use them.”

I am trying to argue that this is itself a moral system. It is a system whereby market forces are given moral authority and freedom of commerce is elevated to a morally good end. Redhurt saying that these things aren’t “inherently good or bad” is only possible in the context of this economic morality.

To respond to Charles’s question (“What should our public morality be? Communitarian?”), I am not entirely sure. I think Communitarian is probably right, although so long as it is primarily civic in its concern, I think we would be heading in the right direction. The market is anything but civic.

 
At 3:40 PM, Blogger StandingOutInTheCold said...

On the minimum wage issue: we absoltuely must have a minimum wage. The Industrial Revolution proved that without forced contsraints large corporations will force their workers into indentured servitude with low wages. Minimum wage takes a chunk out of exploitation. However, historically we have seen that market forces dictate that the minimum wage will never be enough, no matter how high we raise it. If we raise it to $10 an hour today then it will be greatly beneficial for maybe a year, probably not even that long. Because in order to pay $10 an hour to the lowest paid employees a company needs to make more money. So they raise their prices. When every company raises their prices it just causes inflation, no one wins and our economy suffers on the world market. So raising the minimum wage will probably hurt us in the long run.

As you've said, the only way to really change this is to change our culture. If our culture was such that the average person was willing to take a pay cut to raise the wage of the minimum paid empolyees then the lowest paid could be paid more without the company needing to increase net revenue. If the average person was more concerned with the well-being of their fellow humans rather than "tripping out their ride" or accumulating more stuff they don't need or use, then such a thing might happen. If the average person in our country was more concerned with the homeless downtown than with the "Next top model" or being a vegan or playing video games all day (to make sure I'm implicated in this too), then we might be able to accomplish what we propose. If we were able to create a society in which we all cared more about each other than ourselves then it could be done. I believe that the technical term for such a place is "heaven on earth." Its also voluntary Communism, just for the record ;). Such change cannot be orchestrated, as far as I can tell, across a society and must happen on an individual level. We can only change what we do and hope that our efforts will not be totally masked by the selfishness of others. So get out there, and start making some CEO's ashamed to be so selfish!

 
At 3:44 PM, Blogger CharlesPeirce said...

You liberal!

 
At 11:50 PM, Blogger Jackscolon said...

By the way, I heart Pfizer. If I would have had the cash I would have bought tons! of stock at $21 a share a few months ago...

 
At 12:23 PM, Blogger RedHurt said...

j. morg and charles: I agree that Charles is questioning the inequity of the situation. What isn't clear and hasn't been defined is why inequality is morally wrong. Exploitation assigns a moral distinction to inequity, without which inequity is simply a description of relative holdings. I see this as the crux of the issue, because Charles hasn't (and probably can't) explain why inequity is inherently immoral.

And that's what I'm getting at, Charles. I'm not and won't call you a liberal communist bent on destroying free enterprise.

Furthermore, the number of people affected by a situation does not inherently change it's ethical value. That's certainly to be taken into account, but just because something negatively affects more people than something else does not make either of these things inherently more or less moral. More or less useful? Absolutely. But purely right or wrong? I don't see how, without introducing a utilitarian brand of ethics you haven't sufficiently supported thus far.

So, I persist in saying that as long as employee X isn't being exploited, the company is free to pay their CEO however many millions of dollars they'd like to.

I can only assume this is going to lead to a post from Charles outlining why he doesn't think a CEO's work is more valuable to the company than that of the average grunt. To address this, I'll ask "valuable how?", and then refer you to Jacks post about how much more sway the CEO has in affecting his company's profit than the bottom-rung employee.

 
At 1:27 PM, Blogger CharlesPeirce said...

redhurt, I think we're misunderstanding each other.

A CEO crashing a company and dstroying people's stock and savings is worse than an employee stealing office supplies. I'm not making a covert attempt at a utilitarian system of ethics here--that's just common sense. Right?

"The company is free to pay their CEO however many millions of dollars they'd like to."

Of course they are--who said they aren't? I would neither make nor support a law that put a cap on CEO salaries. If I were CEO of a company, I would not accept that much. It's as simple as that.

Also, who said a CEO's work wasn't more valuable than a grunt's? Did you even read my comments? How about this one:

jackscolon wrote: "Are CEO's worth that much? On average probably not, but certain ones are."

And I said: "I'll take that."

I still insist on my point: it is immoral and a gross misuse of resources for one person to be paid that much.

Do you really think the growing inequality of income distribution in this country is completely okay?

 
At 11:50 PM, Blogger RedHurt said...

I think we both know I meant the company is free "from moral obligations" to pay the CEO in any particular way, regardless of what they're paying anyone else.

Why don't you respond to the real message of what I'm saying instead of picking at neat little inconsistencies?

Are the grunts being exploited? Have you shown anything to remotely back up your statement that salary inequity is "growing"? I do think it's completely ok - I'm being paid a fair wage, and my CEO is making 30 times what I make, and that doesn't matter to me at all. He seems to be doing a good job, and has the power to make or break the company in ways I don't have, so in return for making his investors billions of dollars, I'm ok with him getting a few million as a kickback. The company, the investors, etc. can choose to pay anyone whatever they want, and as long as no one is underpaid to the point of exploitation, it's not a moral issue.

In 2005, my CEO had a salary of $1.1 million with a $2.6 million bonus, bringing him to $3.7 million. The company employs 80,000 people. If we divided the CEO's entire compensation for 2005 amongst the employees, it would amount to an extra $46.25 per person. So, do I think it's morally outrageous that the company stole $50 from me to page a huge sum of money to the most important person in the company?

In a word, No. In a few words, not even barely.

I'd list my sources, but the URLs are too long.

 
At 12:34 AM, Blogger RedHurt said...

And by "stole" from me, I mean "used for a purpose other than compensating me", which is what they might be doing instead of paying the CEO so much.

 
At 9:34 PM, Blogger CharlesPeirce said...

http://www.cbpp.org/1-29-06tax.htm

 
At 1:27 PM, Blogger CharlesPeirce said...

"Are the grunts being exploited?"

In general? I wouldn't know. On a case by case basis? Some are, some aren't.

"Have you shown anything to remotely back up your statement that salary inequity is growing?"

Every study done on this concludes that income inequality hit its lowest point in the early 1960s and has been growing since. In a NYT article I can't get to because it's part of TimesSelect, a huge study just concluded that income inequality had grown significantly in 44 of the 50 states. Wages for the bottom fifth of the population have barely kept pace with inflation, while wages for the top fifth have grown.

Check out this table:

http://www.census.gov/hhes/income/histinc/h02.html

In 1967 the top 5 percent of earners controlled 17.5 percent of wealth--they now control 22.4 percent. In 1967 the bottom FIFTH controlled just 4 percent of the wealth--they now control 3.5 percent.

"As long as no one is underpaid to the point of exploitation, it's not a moral issue."

I guess that's the crux of our argument, and I don't agree with you--it IS a moral issue. If you were the head of a huge company, and we were still friends, and the board chose to get you compensation worth 50 million, I'd tell you that was immoral. 5 million? Fine.

Your division of the CEO's compensation among every employee is disingenuous. First of all, I wasn't talking about pay packages totaling that much; and second of all, that's not what I would advocate doing with that money.

To summarize:

(1) It's not acceptable to me, and is immoral, that in our society the top 5 percent of earners control as much wealth as they do.
(2) I don't know how to fix it.
(3) I don't think we should legislate it.

My word verification is gajofabr, and currently Mr. Fabr is sailing his yacht around the Mediterranean while his employees barely get by.

 
At 5:21 PM, Blogger J. Morgan Caler said...

“What isn't clear and hasn't been defined is why inequality is morally wrong. Exploitation assigns a moral distinction to inequity, without which inequity is simply a description of relative holdings. I see this as the crux of the issue, because Charles hasn't (and probably can't) explain why inequity is inherently immoral.”

Well, I would agree with you that inequality isn’t inherently immoral. In fact, in a system like ours, inequality – as a description of relative holdings – points towards something that is probably inherently moral: equity.

Now I feel like I only have one drum and all I ever do is bang on it really hard, but in order to talk about inequality as immoral, we need to situate what exactly we are talking about. My comments – and in fact all those present here – are not dealing with inequality in some general sense. First, we are talking about economic inequality. Second, we are talking about inequality in a capitalist society. Third, we are talking about inequality in the context of a democracy.

That said, maybe we can get some work done. My argument is that severe economic inequality is incommensurate with other deeply held American goods.

First democracy:

If we accept civic democracy as a basic system by which to order or society, then we make certain moral commitments (what it means to be a good citizen, what a good society looks like, what is just, what is taboo, etc.). Only if we accept these basic ordering principles first does gross economic inequality seem immoral.

Economic resources in America are a mediating factor. They determine how much political influence you have, the level of access to policy makers you are afforded, the amount of education available to you, your prominence in a particular community, the availability of the arts and humanities, etc. So, when we think about Charles’s statistics on inequality as a measure of influence, prominence, power and not simply as a measure of wealth, we see that this deeply undercuts the foundations of civic democracy.

We see that it poses a serious challenge the basic assumption that human dignity and civic participation are tightly bound. If a citizen’s dignity and place in society is proportional to his or her ability to participate in and influence the outcome of the operations of government, then severe economic inequality poses a serious challenge.

Now, capitalism:

In a capitalist society, gross inequality crushes innovation. Wealth enables innovation – in fact, innovation requires wealth. When wealth is concentrated at the top, competition is stifled. Intellectual property is concentrated. What we are experiencing now is not capitalism, but corporatism. Corporations and their agents have become the holders of nearly all actionable intellectual property in America because inequality has killed capitalism.

What we don’t have today are entrepreneurs (what passes for them are actually just corporate agents), cottage industry, owner/operator establishments, etc. In short, we don’t have capitalism. That is the result of gross economic inequality.

Conclusion:

So, I don’t want to argue here that inequality is inherently immoral. I have, however, tried to argue that gross economic inequality definitionally undermines other commitments that we are required to have as Americans. To the extent that we don’t think that is the case, it is probably the result of rejecting civic democracy as a basic ordering principle and accepting in its place corporate economics. That is why I argued earlier that this is a moral argument any way you slice it.

 
At 6:03 PM, Blogger RedHurt said...

Well, I agree with both of you here now, I suppose. The context you've given and the arguments posed are exemplary, and I can't disagree with what you've said.

I still think "economic inequility in democracy is immoral" is a false statement. Capitalism requires certain inequalities to function. Our real issue is that this sort of inequality is persistant and insurmountable in most circumstances, right? Our problem isn't that a CEO makes 50 million - our problem is that this affords him an unjust degree of influence over society; that those of us making 50 thousand can't compete with his/her civic influence.

I have a problem with setting these things in terms of absolutes. To what magnitude should a CEO be compensated over the average employee? At what point does his share of the social pie become too large? I agree that our society shouldn't be a tyranny of corporations, but I would think it equally immoral to set the bar too low, and tell a truly innovative and gifted business person that they weren't permitted to earn as much as they could simply because it takes too much away from the rest of society. I appreciate that Charles has taken great care to focus his argument away from solutions, striking legislation clean off the list, but I think terming something immoral necessarily implies we have some idea of what the moral converse would look like, which should lead to some examples of how it would play out.

So, to conclude, I'll agree that having a huge amount of influence focused on a small group of business men is immoral, but I'm wondering if maybe there aren't some other factors we should examine to help balance the scales. If not, where does the line between immoral and moral become crossed?

charles: my example might have been disingenuous, but your whole life is, and I think you know it, buddy.

 
At 7:48 PM, Blogger Jackscolon said...

I'm off to night class, but not before I bring up an important distinction for Charles' statistic.

The reason that wage inequality seems to be growing is that America suffers from a large influx of culturally unassimilated, illegal, mercenary workers from south of the border. Millions of people a year are streaming across to ride the low wage ferris wheel without making their way any farther into our sweet capitalist theme park. Why? You have to speak english or have an education to ride- and these are two things that hold little interest for our Hispanic buddies. The larger this pool grows, the larger the wage inequity is going to grow since there is no way our sweet fruit-farm holding corprocrats can pay wages comparable to real jobs.

Anyway, I need to go take my test in night class now...

 
At 8:55 PM, Blogger CharlesPeirce said...

Anyone besides me have any thoughts on the comments of mair, redhurt, j. morgan, standingout or jacks?

 
At 1:09 PM, Blogger J. Morgan Caler said...

Redhurt said,

“I have a problem with setting these things in terms of absolutes. To what magnitude should a CEO be compensated over the average employee? At what point does his share of the social pie become too large? I agree that our society shouldn't be a tyranny of corporations, but I would think it equally immoral to set the bar too low, and tell a truly innovative and gifted business person that they weren't permitted to earn as much as they could simply because it takes too much away from the rest of society.”

I completely agree. Yet, I think that wealth in America is too highly stratified if it allows for clearly defined classes. Our current situation has long met that standard; now class is exclusively defined by wealth. I like having clearly defined classes in society – I think it is good, important, and noble - but I don’t think that they should be drawn along economic lines. I think that once the difference between the highest paid and the lowest paid workers in our country is great enough that wealth and class can become synonyms, we have a problem.

The President cares more about Michael Eisner’s opinion than about mine because Michael Eisner makes more money than I do. It has nothing to do with membership to a particular class that has some legitimate claim to greater political influence. That is what I find unjust.

The problem is that Michael Eisner (and everyone else) thinks that, because he has a lot of wealth, he is entitled to greater political influence than his lowest paid employee. That is a moral position that represents a major cultural shift away from civic democracy and towards corporate capitalism.

The solution to the problem is resurrecting civic democracy as our public morality. In that system Michael Eisner would be embarrassed to have as much money as he does (or at least embarrassed that his wealth is so public) and would never presume to have important political opinions simply because of his wealth. In that system, your fictitious “innovative and gifted business person” would never make it his or her goal to “earn as much as they could,” but rather to be a dignified produce who contributes to the life of his or her community.

Being economically motivated is a moral commitment and – at least in an extreme way – is fundamentally at odds with being civically motivated (which is also a moral commitment).

These are moral decisions. There are lots of things that shouldn’t be illegal (like earning as much as you can) that should nonetheless be so outside of our moral spectrum that it doesn’t even occur to us to take advantage of the fact that it isn’t outlawed.

I don’t want to tell people that they can’t earn as much money as they want. I do, however, want them to be ashamed to think that earning lots of money is anything but a shameful goal.

 
At 3:37 PM, Blogger Mrs. Momomoto said...

"Instead, we should create a culture from the inside in which such an executive is ashamed to be paid that much when his lowest paid worker gets so much less."

I really don't think shame could do it. Shame vs. millions of dollars? Any attempt would just massively shift the spending power within the population to those who are shameless. In my opinion, the only thing that could realistically do it without serious negative social and economic consequences is competition.

If it were easier for someone with a better business plan to compete, then, unless the CEO was really worth every last thousand of his compensation, the company that instead used the equivalent of his salary to do something more worthwhile (reduce prices, attract better workers to other positions than CEO, enhancement of innovation or efficiency, etc.) would draw business away from the CEO-heavy company.

I think the reasons this doesn't happen has two parts. First, certain stifling sorts of regulation (as in France*, but the situation is nowhere near as bad here), especially those involved in getting a business off the ground. Second, I think really well designed anti-trust regulation is very important for maintaining a free economy, and I don't think that's what we have. We know very well what happens with a totally laissez faire economy: the people who are successful at an early time become take politician and economic measures to become robber barons, enforcing what is essentially private tyranny. Feudalism. France's system doesn't work well for people, but, neither does that.

"Minimum wage is a tougher issue. I'll make this argument: if there should be a minimum wage, it should be higher than it is now: $5.15, and last raised in 1996. WTF?"

The best account I've heard of minimum wage it that it is best when it is low, significantly below the market price for unskilled labor. The reason being, if it were near or at or above the market price for unskilled labor, it would interfere with the demand for unskilled labor, making it more difficult for unskilled laborers to find work. Yes, those that did find work would have more pay, but those that did not would be unemployed.

As for why it exists at all if it is going to be below market price, the argument is that it helps prevent exploitation of people who can be easily conned, or who have problems understanding exploitation, or the like.

So, there is flexibility in the unskilled labor market--not just in the ability of the average price to fluctuate as various factors change, but also, in certain individual circumstances someone might be willing to go down a bit, to prove themselves for example--but an employer who tries to pay a new immigrant or a mentally disabled person a mere twenty-five cents per hour, or a dollar-fifty and hour, or the like--something clearly exploitive relative to what that person could easily get from a different employer given market rates--well, we're not having that. Not legally at any rate.

This doesn't necessarily mean I'm in favor of the minimum wage (I think the fact that it helps prevent occasional incidents of exploitation, which is good, needs to be weight against the fact that, once it exists, it creates something very attractive for politicians to fiddle with to win votes, potentially hurting the economy significantly in the process, which could be bad for very many people), but I do see a good argument for it to exist, specifically so long as it is set significantly below market price for unskilled labor.

* It is bad when the government makes it extremely difficult for people to create new ventures in the economy, because this causes a real, firm class structure. People are forced into existing structures (the government, existing large corporations, etc.) to feed themselves. The existing structures, having no competitive pressure, can quite easily start making decisions on the basis of who is buddies with whom, which job applicant has a nicer behind, etc. The difficulty in starting new ventures also means that any population growth will create intense social pressure for the existing jobs within the existing structures. This means that people who already have jobs will notice that it is in their interests to do whatever necessary to keep them. Given that there is no competitive pressure, what is necessary to keep them is social commitments with other people who are similarly anxious to keep their comfortable job in the existing structure. Thus you get a very rigid class structure, because it becomes based on social connections to keep a limited few in the fossilized privileged positions, instead of being based on work and creativity to earn functional positions and form adaptive structures, imperfect but checked to a large degree by the bottom line. This result is a very different sort of beast from disparity in pay. I would argue that a large disparity in pay not coincident with this sort of rigid class system is typically a much lessor social ill that this rigid class system, even when this class system is marked by a fairly small pay disparity.

 
At 6:20 PM, Blogger Mrs. Momomoto said...

Charles said:

"There's a conservative premise inherent and left implicit in discussions like this, which j. morgan was starting to get at. It says that I can't judge economic matters morally--if a CEO is paid a certain amount, it's sort of neither right nor wrong; the market just happened to set his or her salary there."

It is a libertarian premise. Libertarian ideology holds that the only moral duty is to refrain from interfering with others and their property, and the only moral right is to have one's self and property not interfered with by others. On morality beyond deontology, libertarianism is relativistic. As I understand it, according to this system, each person may work out his own ideas of morality beyond deontology as he sees fit, with no standards existing for which are right and which are wrong. (Weirdly, sometimes this leads individual libertarians to get quite hostile about people who do, voluntarily, insist that some things beyond the single duty and single right are wrong, but this is another issue.)

This understanding of ethics is the root of the insistence on moral absconding with regards to the high pay of a CEO, which is in their minds something quite outside the bounds of your one right and your one duty, simultaneous with the moral adamancy about economic relationships that cause the high pay of the CEO.

Of course any one individual may be influenced by a mixture of ideologies and philosophies, but putting mixtures aside for the moment, conservativism--and classical liberalism for that matter--tend hold positions that look roughly similar to the libertarian position on the surface, but that are actually quite different on a fundamental level.

For example, a conservative or classical liberal might say the disparity is not itself bad (Winston Churchill's comment on "equal sharing of misery" appropriate here), but that it may indicate something immoral, for example if it is a disparity resulting from something other than a disparity in effort, talent, random luck, insightful timing, productivity, or the like. They might also say that, even if the disparity results from something that isn't moral (it results from something other than one of the things which makes it a just disparity), having the government interfere with something like the high pay of a CEO in an attempt to to remedy the injustice will create more problems than it is worth (as opposed to either just living with the problem, or doing voluntary individual-level things which might, if commonly adopted, help counter the immoral thing).

They might attempt to back this position up with the argument that creating a government structure to prevent CEOs from making that much money will have negative side effects insofar as there will then be a government bureaucracy that is likely, given the institutional nature of government bureaucracy, to end up hassling and constraining all manner of people in all manner of economic activity, ending up much more trouble than it is worth. Or, that using government to constrain CEO pay will create less incentive for those CEOs who are really talented to use their skills, to the detriment of the economy as a whole and thus to the detriment of people in general (who benefit from a vibrant economy).

Their thinking tends to get into issues of unintended side effects and issues of the precautionary principle: if it is a complicated quasi-natural system and working tolerably, it is likely better to just let it work tolerably than to either (a) impose some big blunt measure that will interfere will all sorts of unintuitive complicated dynamics necessary for keeping it working even just tolerably, or (b) restructuring the whole thing, risking utter disaster, on the basis of an untested theory. The changes they're likely to favor so long as the thing appears to be working tolerably, are very carefully analyzed small, gradual, changes. Not so much because they believe the have an absolute moral imperative to abscond, so much as they're very deeply wary of inadvertently making things worse.

While I don't necessarily agree with all the above arguments, I do think they poses much more opportunity for meaty and insightful technical discussion. So I tend to think the distinction between the libertarian position and the conservative or classical liberal position is an important one to make.

"I think that's preposterous--how are we to cease being moral agents when we approach economic matters? I already made the point that I don't advocate legislating or taxing our way out of this, so you can't accuse me of attempting to stifle business growth, or something like that."

The disagreement is not about business growth. The disagreement isn't about whether people starve or stagnate for sake of stifled opportunity, isn't about the fact that wide disparity with opportunity is better that equal misery or narrow disparity without opportunity, isn't the idea that some times disparity results from just things and other times from unjust things, isn't about building a system that won't devolve into feudalism, and it isn't about concern that fiddling with complex tolerable things might render them intolerable.

It is about deontology. This may sound strange, but if one argues extensively with radical libertarians, the thinking behind this starts to become more clear. There's also a short paper that's a nice introduction if one has tended steer clear of extensive discussion with libertarians and anarcho-capitalists: Narveson, Jan. 2000. Libertarianism. in The Blackwell Guide to Ethical Theory. ed. Hugh LaFollette.

 

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