To: MacCoy who wrote (35117 ) 2/23/1999 6:52:00 AM From: Neocon Read Replies (1) | Respond to
I deliberately do not deal with "ill- gotten gain". You seem to think that much of what passes for honest earnings is unrecognized ill- gotten gain. Since we do not ordinarily let the criminal retain the profits of his adventures, if your premise is granted, the income cap makes sense. But since the market determines wages and salaries, I do not grant the premise. Rather, I say that any tampering with the price system, which is the most efficient means that we know of to determine the allocation of resources, threatens economic efficiency, and therefore over- all economic well- being. Sometimes, such tampering may be justified, but not the kind of wholesale regulation that an income cap would entail. We are rarely in a position to evaluate the propriety of individual negotiations. For example, it is simply true that the loss of Michael Eisner would cause the value of Disney Stock to plummet, at least unless there were a well- prepared and publicized succession. Merely hiring Michael Eisner would cause the stock of another company to rise sharply, even before he could be credited with doing anything, such is his reputation as a CEO. Therefore, there is every incentive for another company to try to lure him away from Disney, and for Disney to increase his compensation to induce him to stay. This is a reflection of his actual market value.I choose Eisner because he is one of the top paid executives in the country, and his compensation package would widely be viewed as exorbitant. But it fits precisely with my Michael Jordan example earlier, and the questions arising from it... Why shouldn't Eisner benefit from his actual market value, and how would we allocate him as a resource absent such incentives? Indenture him to Disney? Raffle him off? Anyway, the relative merit of people's income is usually beyond obvious calculation, and nobody's business.
