Comment by Patient0 | Hacker News Reader

Comment by Patient0 | Hacker News Reader

I wish someone in the article had said something like this:

We live in a society where individuals are mostly free to negotiate salary and compensation with whoever they choose to work for, and employers are in turn free to negotiate with who they want to employ.

The actual compensation then comes down to a mixture of supply, demand and negotiation skills. This can often lead to "unfair" outcomes - but we've found that alternative systems in which prices and wages are externally regulated result in everyone being worse off.

Why is this so? It is not so much to do with how hard people work, but how much risk-takers are compensated for taking on risk. If risk takers aren't adequately compensated (and for sure, part of what they are risking is the time they are spending), it becomes irrational for anyone to take on the risk, and so no-one does. Then, everyone is worse off.

To give a concrete (but arguably overly simplified) example: During the industrial revolution, there were lots of different attempts at making more efficient steam engines. It wasn't possible to know up front which designs were going to work and which weren't. But people were motivated to try lots of different things, because they knew that if they succeeded, all of the time and money spent researching each failed attempt would be more than paid for once they succeeded. Without that compensation though, it doesn't make sense to even try, leaving everyone with the inefficient steam engines.

All this talk about supply and demand and compensation for risk is a load of bullshit.

The salary of people higher up in an organisation is not higher because they are so brilliant; it's higher because these people can decide how to distribute the money.

This is true in all areas of the economy. People who are close to the money will always make more than people who do the work. A realtor will earn a lot more from the sale of a home than the plumber who laid the pipes. The outsourcing agency will earn significantly more than the workers who end up doing the job. Temp agencies have a markup of more than 100% on the salary of their temporary workers.

All that talk about "negotiation skills" and "compensation for risk" is just bullshit that people tell themselves to justify a higher salary. Why is it so hard for people to accept that they are lucky to earn so much? Why do people always have to find an excuse why it's only fair that they earn more than others?

We're all grown ups, we all know that the world isn't fair. There's no need to come up with elaborate explanations why pay inequality is a good thing.

>"Why do people always have to find an excuse why it's only fair that they earn more than others?"

Because we get accusatory comments from people, and people demand "justification" from us. When you blame/accuse people, they go on the defensive and start trying to justify it to you, and I guess to themselves as well if they internalize the blame.

If you read closely what I said, I wasn't really disagreeing with you. You are attacking a "straw man": I never said the result is fair (quite the opposite!), or that the people who earn higher salaries do so because they are brilliant.

You made one valid critique of what I said: I agree with you that many (maybe even most) "ridiculously rich" people probably benefited from nepotism, crony-ism and general corruption. There are plenty of examples in non-capitalist societies too (Soviet Russia, Venezuela, Cuba).

I would go further. My clients' money is their money. As it's their money, they can do what they want with it. If they choose to give it to me, it's now my money.

Similarly, if you have a job, the money your employer gives you is now your money. If you have a business, the money your customers give you is now your money.

It's true that someone making £60k a year probably works harder, with more responsibility, and has invested more up-front in their own skills than someone making £20k a year. However this shouldn't be used as the justification for their higher salary; the justification has to be that freedom and property rights are inviolate principles.

If you cede those principles -- e.g., by conceding that hedge fund traders and CEOs cannot possibly be "worth" their high salaries, and so they should not be permitted their salaries, and so they and their employers do not have a right to their own money -- you effectively give free reign to the government to interfere with any economic transaction in the name of "fairness" or "justice".

Your concrete example doesn't work.

In a system of equal wages you'd still get paid for developing your steam engine even if it didn't work - the safety net means that engineers won't have to take a risk (beyond wasted materials) in order to develop new designs. You'd need a central bureacracy [which is the problem] so you could apply to a group akin to the InstMechEng and they would asign finances for your project or not (or you could self-finance if the costs weren't too high).

It also however means that when they make the new design everyone can benefit rather than just them. For sure, some people will consider it only worth working to improve things for themselves and so refuse to work to make new engineering advances.

A better example you could give IMO would be something like coal miners. "No one would want to work in a coal mine, as it's high risk, if the reward is the same as working in an office as that's low risk.". I don't think it's true, some people will still want to work manually, despite the risk - people take risks for pleasure so the economics are far more complicated than "people only take risk if there's greater financial compensation".

It's a source of sadness for me that one might feel the only reason to do something is to have more than other people rather than to give more, to make everyone's world better. Greed is hard to combat, I certainly haven't managed that, but it's not the only motivation to work.

Greed is easier to fabricate (just turn the inequality knob up) than creativity or some other source of intrinsic productive motivation.

Fear similarly so.

In a system of equal wages the supply of engineers would vanish because there would be no incentive to spend four years in college and whatever local licensing. Literally no one would know how to do the job.

In a system of equal wages the supply of coal miners would dry up because no one will risk their life doing backbreaking labor when there are much more safe opportunities out there.

So, no physicists ever do physics because they can get jobs as quants earning vastly higher wages?

Building, farming, construction, mining ... no one chooses to do these jobs because there are safer jobs available?

Under our current wage system? No. I have not claimed any of those scenarios. I'm claiming that by reducing pay incentives from the equation, you will see a decline in certain professions and also the education typically required for those professions. These professions are also the professions that already have a supply glut and by removing one of the naturally occurring incentives for these jobs (a market wage), you only make it harder to find people able to do the work.

If there's a glut in supply and you reduce the financial incentive shouldn't that lead to a greater proportion of people who are passionate about the work of itself. That clearly doesn't work in all vocations, however.

Can I ask, what motivates you to perform your particular functions in society, is it only the financial reward?

It's true that, in principal, an efficient central bureaucracy could do a better job of allocating people's efforts. For example, the Government could be responsible for all R&D - and arguably this was effectively the case when the US govt paid for all those Moon missions. So... maybe bigger government + social safety net could actually lead to more efficient outcomes.

Re "taking risk for pleasure": I would need to adapt my argument to start talking about corporations and not individuals, for one thing. I think it's probably more important (for economic efficiency) that large-ish corporations are compensated for taking on risk than individuals. Corporations have a duty to their shareholders to not take risks without commensurate compensation.

It gets complicated quickly...

The key point I wanted to make was that there is a good justification for inequality, and it's about economic efficiency, not just what people think they deserve. As you have done, you can also still argue against inequality while keeping economic efficiency (by introducing concepts as social safety net, centrally planned R&D)... That's a whole other debate which unfortunately was also not really made in the article.

"You'd need a central bureacracy [which is the problem]"

It's more than a problem - you couldn't implement such a system without a totalitarian state.

"It's a source of sadness for me"

It's a source of sadness for me that you haven't thought through the details of your plan to "make everyone's world better".

"one might feel the only reason to do something is to have more than other people"

Are you saying you do ascribe to this position, that your only motivation to work is to get more money (and by extension luxuries) than everyone else has?

My plan, which I haven't mentioned is to guard against my own tendency towards greed and basically follow Ghandi's maxim of "being the change you want to see in the world". Do you have specific objections to that plan?

"Are you saying you do ascribe to this position, that your only motivation to work is to get more money (and by extension luxuries) than everyone else has?"

No. I never said anything like that, and you are arguing dishonestly.

(For the sake of other readers: the goal of work is to achieve eudaimonia, productive happiness. The false dichotomy between "material greed" and "spiritual self-sacrifice" causes massive and unnecessary misery. See the books in my profile for details).

"Do you have specific objections to that plan?"

The change you said you wanted to see in the world was everyone earning the same wage. Here's a specific objection: let's say I'm a plumber living in your utopia, and some of my neighbours complain that InstPlumbing is often slow fixing their pipes. Though it's a fair bit of work, I'm willing to do it myself in exchange for a few of their hoarded dollars (or cigarettes, or whatever), which I later barter for extra bread rations for my kids. Whoops, now I'm earning more than other plumbers and we have inequality again.

Should I be banned from performing this greedy, selfish activity? And how are you going to stop people from engaging in such voluntary trades without totalitarian surveillance?

...but demand profile resulted in supply of articles of different variety and quality.

haha! I like it!

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