“The Wall Street bankers were making as much money as George Clooney!” aktualne.cz (prestigious CZ news server.)
What is wrong if somebody, CEO of a big investment bank for instance, is making a couple million dollars a year? As long as the wage reflects performance of the company (however you measure it) then there is nothing wrong with huge bonuses!
This is apparently a minority opinion. Well, minority opinion only in to an extent. People seem to approve enormous wages in certain professions. Who can make a lot of money? In my opinion the public approves enormous wages of sport stars, actors, artists, but not bankers or managers.
People seem to approve high wages for somebody whom they admire! For somebody who seems to be a distant, god-like person.
Everyone bumps from time to time in to a top manager of the factory where he works and sees that the manager is a normal person as everyone else. Why should (s)he make more money than everyone else? The only visible difference is that he is wearing a tie!
On the other hand, George Cloony is this super rich, handsome guy living in distant LA, having sex with every young good looking film star… People are dreaming about such life and idealizing it… In my opinion this idealized image of Clooney (Beckham, you name the retard…) and his life is what makes people approve his enormous income.
I think this is easily testable. All you need to do is measure approval of Clooney’s income in LA (or wherever he lives) vs. for instance Prague… (Shiller, Tversky and many others have done similar research)
p.s. I am not justifying bonuses for behavior that led to the crisis, but bonuses in general.
p.p.s. I can’t understand how can any person ( with IQ higher than average chimpanzee) say that the bankers were making AS MUCH money as George Clooney (or Beckham). Banker is a profession that is absolutely essential for functioning of the economy. I don’t think the same can be said about actors. And even though I approve high wages of actors (b/c I believe in free marker), if I were to choose between a world without Warner Bros and a world without Goldman Sachs, I would choose the world without Warner Bros…
I’d choose the world without Goldman Sachs, without Tom&Jerry the world has no value.
The problem is that the bailout of financial sector costs so much that it really seems those well-paid bankers are merely thieves. Hence people are angry and seek punishment.I don’t understand the whole thing enough to be sure they are wrong.
Holla,
I was gonna write an update on this post, because it sounds a bit differently than I intended… You were faster.
I absolutely agree with the second part of your comment, but in the post I was trying to say smthing a bit different. I was thinking about compensations in general. I think even before the crisis, people did approve huge compensations of soccer players, actors, “magicians” rather than big bonuses of managers and bankers… I was trying to propose a way to test why…
I strongly disagree with the first part of your comment! I’m gonna make my kids watch Bloomberg instead of Tom&Jerry!
Haha, I remember myself spending ridiculous amount of time watching CNBC when I was at high school. Not actually understanding anything, I just liked how the numbers move. Hm, maybe I should reorientate my interest on time series now.
However, Tom&Jerry formed my moral values more than anything else so I still prefer them. 
About Clooney and his cleaning lady – it’s an interesting question but I would bet on the other option. I believe people would accept “unfair” richness more when they know the person really well. It might be a U-shape curve. But maybe I underestimate jealousy.
Exactly, i was talking about the bottom of the U-curve. If U ask person form the main street in LA, she is less likely to have idealized the life of celebrities, because she has met them, worked with them (as an extra in a movie..), knows someone who worked with them… Since she is less likely to idealize their life/admire them, she is less likely to approve the wage.
We (in Prague for instance) are less likely to approve high wages of managers, bankers b/c we are meeting them on a daily basis Our average person from the main street is likely to bump in to her boss every once in a while. Talk to the banker when trying to get a mortgage etc…
I’m aware that the theory has some flaws. Our average person does not bump in to a CEO of GS or GMC on daily basis. – on the other hand I think our average person can’t make a distinction between a CEO of GS and a head of some provincial bank…
What is more, people will approve high wages of doctors (US) even though they’re meeting them on daily basis.
What I’ve proposed is only one ingredient in the mix of jealousy!
Anyway it would be an empirical study, so I would need the money and time to collect the data. I have none!
thx. for you comments Jilm, you’ve forced me to think hard about my proposal!