Sunday, December 10, 2006

Responding to the general concern over growing income inequality, one Daniel Akst, writing on "the soaring compensation paid to those at the very top of the pay scale" in the New York Times, takes the panglossian view:

If career choices today are influenced more by money, it’s mainly because social circumstances have changed for the better. Smart women, for example, may choose banking over teaching, but this reflects only their hard-won freedom. Is anyone suggesting that we take this away? Besides, most of us are poor judges of how useful our own work is, and by putting a price on what we do, the marketplace offers a bracing corrective to our inherent myopia.

One of the social circumstances that have changed, of course, is that certain jobs (e.g., in finance) now pull in much higher multiples of the average wage than they used to, for no immediately obvious reason. And it might be nice if Mr. Akst addressed the point specifically because, well, that's what he says he's writing about. But instead, we get this:

Scoundrels aside, remuneration is a rough but grimly reliable indicator of social utility, and Adam Smith himself pointed out how much the rest of us benefit when the talented pursue wealth. Yes, markets will sometimes fail to compensate activities we cherish, but consider the alternative.

Imagine for a moment two strange countries. In one nation, Cardia, people choose careers with complete disregard for financial compensation. In the other, a land known as Crania, people choose work based entirely on how much it pays. Neither country sounds like a very pleasant place to live. But I’ll wager that Crania would be a much nicer place than Cardia, if only because somebody there would pick up the trash.

As a response to the critics of income inequality, this makes a whole lot of sense --- if they were advocating eliminating differing compensation levels altogether (and if janitors were notably well paid). Since they're not, what we have so far is cheap rhetorical sleight of hand, which in our debased culture would be unworthy of comment were it not followed by this:

Don’t underestimate this. In Crania, financial motives would promote hard work, innovation, specialization and economic growth, resulting in longer life, better health and a richer culture for its residents. The contractual relationships between citizens, however impersonal, would at least free Cranians from the kind of dependent servility they might fall victim to in Cardia, which would most likely be one of those awful places where politics, flattery and backstabbing expand to fill the gaping vacuum that remains when financial motives are absent.

So, in Mr. Akst's world, it's too rare to be worthy of notice that anyone volunteers to do dirty work simply because it needs to be done. And the only noteworthy alternatives to influencing behavior by monetary inducements are "politics, flattery and backstabbing" --- for which money itself is, by similar imputation, rarely if ever at fault. And you know, I believe this may be true of Mr. Akst's world. (Well, all except for that last bit). But while that's a sad commentary on Mr. Akst, I'm not sure there's a lesson here for the rest of us.


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