(no subject)
I've read recent blogs and socially-minded op-ed pieces about equality, fairness, income gaps and they seem to be voicing an increasingly-popular criticism of our economic system: winner takes all.
This has been known to economists for a quarter of a century, as Tournament Theory. I would urge you all to read the second reference on that Wikipedia page, as the bland 'Forbes article' header hides a surprising article by Tim Harford:
Why your boss is overpaid
I say 'surprising' because Harford's biting and incisive wit is somewhat muted here. These three paragraphs encapsulate his arguments, and the moment that you read them, you will guess my predictably-Machiavellian objection:
First, one way for you to win is for your colleague to lose. Companies that rely too heavily on competition to determine promotions may find that their employees discover that the most efficient way of winning a promotion is by sabotaging the efforts of their rivals. You don't need economic theory to spot that risk.
The second , and more counterintuitive, prediction of tournament theory is that the more luck is involved in work, the larger the pay gaps should be between the winners and the losers. If Jack's promotion is 90% luck and 10% effort , Jack may be inclined to goof off - - unless, of course, the rewards for promotion are absolutely astronomical . And they sometimes are.
Tournaments also demand increasingly absurd pay packages as workers get higher up the hierarchy. At the lowest level, a promotion may not need to carry much of a pay increase, because it opens up the possibility of future, lucrative promotions . Nearer the end of your career, only a fat check is likely to spur you on.
Right there, in the first of those three paragraphs, is the 'Strong Machia-Morphic' observation. Namely, that rational economic participants can be viewed as Machiavellian schemers who will find a means to any end. So far, so good... But what about a more typical - and far more subversive - human response?
People will put more effort into achieving promotion than into doing their jobs. Indeed, in a hyper-competitive environment, getting promoted IS your job. Sod the customers and the shareholders and the wider community!
...And, indeed, the idea that utility is the key to reward. Rather, you get promoted for being good at, er, getting promoted. Which leads us to his second paragraph, which - rightly - points out that pure damn' luck is more important than contribution and ability in a tournament - and this randomness is a feature, not a bug.
Or, in other words, The more unequal the pay distribution, the less meritocratic the organisation.
Odd that Harford has so little to say about the obvious solution: better incentives, aligning the employees' goals with those of the shareholders and customers. This is difficult, it requires hands-on management, and it needs skilful and *engaged* management, not self-interested climbers seeking advancement by losing heroically at golf to their Director; Harford points out, correctly, that making the employees compete against each other in a tournament is a far easier way of allocating the rewards than actually attempting any management - but he misses out the bit about how damaging this laissez-faire can be.
So... What kind of Machiavelli or moron mismanages this mess? The third of those three paragraphs provides a clue: it's the economists' angel, Rational Economic Man, who is only spurred on by ever-fatter paychecks.
...And, presumably, is not appalled by the mess that propelled him to his luxuriously-carpeted office. Manipulative and disproportionately-lucky and indifferent at best to his employees, coworkers, customers and investors; the common term for such an individual is 'bastard'.
Not everyone is like that: but tournaments promote them and you are getting paid far less than you contribute as a result.
Me, I'd prefer to work in a co-operative organisation. And I wonder what the hell's gone wrong, that co-operative effort - which is fundamentally more productive, is not the dominant social form of our economy.