The "Greed" Fallacy (Thomas Sowell)

Townhall.com ^ | January 23, 2007 | Thomas Sowell

[gogeo]

Nope...this article is like a Rorschach blot...you lose...

[gogeo]

If Sowell, and you, are correct, then the CEO doesn't fully understand the job of anyone else in their business. What then, exactly, is the CEO's function, and what makes their own skill so rare?

"There you go again..." Ronald Reagan.

[TChris]

Dr. Sowell's Basic Economics should be required reading of every US Senator.

I agree, but you don't go far enough. It should be required reading for every elected official at every level.

[Dead Corpse]

I wonder if Hunter needs a VEEP. Then again, Sowell would make a good President too... ;-)

[Dead Corpse]

"Throw a rock at a pack of dogs and the one the yelps is the one you hit."

[r9etb]

I like Dr. Sowell a lot, but this article is disingenuous. He seems to be actually ruling out greed as a factor in corporate salaries.

Which is, of course, ridiculous. Of course greed can be a factor, and sometimes a lot of folks are willing to play along with it.

Did he simply not pay attention to what motivated the nice people at Enron?

[DreamsofPolycarp]

Milton LIVES!!!!!

I love Thomas Sowell.

[Theophilus]

I'm with you, I not impressed by most CEO's, what they do and what they contribute.

I'm with Sowell, I don't have any stock therefore I have little say in the matter of their compensation.

[Diana in Wisconsin]

I & Mr. Sowell were just using the CEO as an example of someone that has skills that others will pay for. You're probably right that not many get to demonstrate their skills in that area; but who'd want the ulcers? LOL!

Take me, for instance. I sell new & used books. Now, how would I know which ones sell best? How do I know which older titles will consistently sell, no matter what condition they're in? Who can find a 1939 First Edition of a book at a garage sale for 25 cents and turn around and sell it for $50? Well, that would be me, because that's another area of expertise that I have. I'm not the only one, but I'm the only one that my customers know of, so I'm valuable to them. :)

I also raise laying hens. My egg customers swear they have NEVER tasted a cage-free, organic (though not certified) egg that tastes as good as the ones my hens produce and will pay up to $4 a dozen for them (when you can get grocery store eggs for 39 cents!) Now...do these people need to get inside of a hen's head (not much room in there) to know how the hen does that? Nope. Does my average customer care (versus those weird "Foodies" who grill me) what I feed them (all natural grains and veggie scraps)? Nope. They just like the product and are willing to pay me for producing it.

My husband gets upwards of $90/hour for his computer skills. Personally? I think he's a goofball most days, and certainly not worth $90/hour or any portion thereof to take out the trash for me each week, or till the garden for me in the Spring, LOL! Yet, people are willing to pay that kind of money to make their computer problems "go away." Which is the kind of "magician" he happens to be. :)

I'm not defending CEOs. I would if I were one, I guess, but they matter little to me in MY world, aside from a few Investment CEOs that I trust. :) As long as they provide the shareholders in THEIR world with good returns on their investment, how is their value as a CEO any different than my value as a lowly Chicken Farmer, depending upon the customer?

It's a sliding scale of course, LOL!

[gas0linealley]

I wish your view, about CEO compensation, would get as much exposure here, as Dr. Sowell's. Thanks!

[jimfree]

Smartest man in America ping!

[gas0linealley]

"There you go again..." Ronald Reagan.

Reagan may have been worth his salt, but Carter and Clinton were not. Same goes for many over-paid CEOs.

[gogeo]

(sigh...)

[hopespringseternal]

Did you, by any chance, see yourself in the article?

I have seen it and lived it (meaning I have worked for companies with exactly the type of CEO I described). Now, I have seen and worked for some truly good CEOs, too. The difference is night and day. In my experience it has always been readily apparent which type I was working for.

[ROTB]

I was going to say that also. Thanks and agreed.

[stig]

One popular explanation is that executive salaries are set by boards of directors who are spending the stockholders' money and do not care that they are overpaying a CEO, who may be the one responsible for putting them on the board of directors in the first place.

It makes a neat picture and may even be true in some cases. What deals a body blow to this theory, however, is that CEO compensation is even higher in corporations owned by a few giant investment firms, as distinguished from corporations owned by thousands of individual stockholders.

The giant investment firms are part of that same pool of talent that ends up on board of directors (ie. they are all part of the same old boy network). So the theory stands as proposed.

[conservatism_IS_compassion]

It's OK (if risky) to disagree with Sowell, but anyone doing so ought to at least offer up some reasons and deal with Sowell's argumentation head on.

Hear, hear!