1802. Slackjaw - May 22, 1998 - 1:59 AM PDT
"It's these special little flourishes that keep you near and dear to me."
Oh, and I suppose the earth rocking flourishes are just a cheap, good time.
1803. Slackjaw - May 22, 1998 - 2:01 AM PDT
I treated him like a normal human being until he started up with the claptrap about being stabbed in the back (ok, that was in here) and my simplified models.
I did not see Boomerjeff's description of you. I try not to read his posts. Where was it?
1804. CalGal - May 22, 1998 - 2:02 AM PDT
Slack,
"You must induce a participation decision in your employees, and it will sometimes be the case, even in a ONE PERIOD employment relationship, that doing so requires conditioning pay on effort instead of results. This is because, with risk averse employees and profits subject to random shocks, basing pay solely on profit may not be attractive to the employee relative to the his next best alternative. "
I know you don't say the word "salary". I'd be able to understand you if you did.
But in this above paragraph, aren't you talking about salary? Or bonus? Or pay for work done? To me, these are three separate things.
1805. CalGal - May 22, 1998 - 2:03 AM PDT
Slack
"Oh, and I suppose the earth rocking flourishes are just a cheap, good time."
(urgent whisper)
We can't talk about your P-ness here!
1806. CalGal - May 22, 1998 - 2:05 AM PDT
Slack,
See 34379 and beyond in Politics (about 10 posts). Relevant because of 1800 and 1801. (at least to me)
1807. Slackjaw - May 22, 1998 - 2:05 AM PDT
what I'm saying is that the optimal contract will sometimes be part wage-based and part piece-rate. A chunk is guaranteed as long as you put in the effort, and a chunk is based on the piece of firm performance traceable to you and some chance.
1808. Slackjaw - May 22, 1998 - 2:06 AM PDT
hahahahahahaha
1809. Slackjaw - May 22, 1998 - 2:07 AM PDT
(optimal from the employer's perspective, i.e., profit maximizing)
1810. Slackjaw - May 22, 1998 - 2:08 AM PDT
I do not concur with his description.
1811. Slackjaw - May 22, 1998 - 2:09 AM PDT
but now those messages above make sense.
1812. CalGal - May 22, 1998 - 2:14 AM PDT
Slack,
"what I'm saying is that the optimal contract will sometimes be part wage-based and part piece-rate. A chunk is guaranteed as long as you put in the effort, and a chunk is based on the piece of firm performance traceable to you and some chance."
Right. Now, what I *thought* the conversation was about (but as you know, I'm largely clueless) was should you reward effort or quality. In keeping with the fact that quality has to do with brains and stuff that isn't fairly distributed, but effort is.
(This may not have been what *you* were talking about, but too bad.)
FTC said that he was looking at a proposal to pay his teams for effort, not for results. Well. To me, he's just saying that it's worth it for him to salary team members because he needs to keep them on leash on the offchance they get the job, and also because the work they're doing in the proposal is of value to the company in getting th job. So that's just salary. Has jack to do with rewarding effort vs. quality.
Where effort vs. quality comes in to play is:
1) Amount of salary paid
2) Bonus if proposal is won (or any bonus)
To reward people based on effort rather than quality in these areas is what I consider to be anathema.
I realize that you're some sort of student and this is irrelevant--you're going to be tenured and get paid without either quality or effort. (g)
I was just trying to clarify what everyone was talking about. Because paying people to work on a proposal is, as you say, a contract. Has nothing to do with the effort vs. quality, is it fair to reward smart people issue that's being debated.
1813. CalGal - May 22, 1998 - 2:17 AM PDT
Which part don't you concur with? The alluring outfit? The peacemaker? Now I'm confused.
Of course, this might be sour grapes on your part. You could be one of those guys that only lasts for 15 minutes and so doesn't qualify for a disappearance with me.
Because as I've said, I don't reward effort. Just quality.
(and if this doesn't make sense, you didn't read far enough to Adam's comment.)
1814. Slackjaw - May 22, 1998 - 3:20 AM PDT
the things I've said don't have any bearing on the ethics that have been discussed here, unless profit maximization sounds like a good ethical criterion. Somebody appeared to be saying that you wouldn't want to pay based on effort, only on output, and this need not be true. If you allow me a little structure on the randomness in output and how output and inputs gets translated into profit (i.e., the profit function), I can prove it.
You must tell me more about what you mean by "quality." Quality of what?
I think, based on my reading, that I do not consider it anathema to pay some salary no matter what for effort in proposal writing, and some bonus or piece rate if you get the job. But you have to tell me a little more--are you talking about effort (that is, "effort") in securing jobs? By anathema in this case, I presume you mean something you'd never, ever want to do under any circumstances.
This is pretty much exactly what I'm talking about, in fact. The employees have noisy control over whether they get the job--part of that depends on chance. If they are risk averse (say, they'd rather have $1,000,000 than $2,000,000 if a coin comes up heads and $0 if tails), why base their pay on risky forces beyond their control? It doesn't help the employer's cause and just makes employees worse off.
Now, the deal is, if you win the job, the boss knows the team either got lucky or busted its collective ass. I am assuming the boss can't tell which is which. But the boss can, in theory anyway, figure out the likelihood of each. For that reason, SOME of the pay will have to risky, but not all of it, in order to induce the team to (a) remain with the firm, "on leash" and (b) put forth the effort level the boss wants. The non-risky part of pay is to satisfy constraint (a), and the risky part is for (b).
1815. Slackjaw - May 22, 1998 - 3:20 AM PDT
The boss faces risk, and gives the employees essentially a facsimile of his riskiness so that their interests are aligned. If employees face no risk and get paid the same no matter what happens, hell, screw the boss! If they face too much risk, they won't even want to stay on the job.
Allocating piece rates within the team is somewhat more complicated.
1816. CalGal - May 22, 1998 - 3:30 AM PDT
Slack,
"Allocating piece rates within the team is somewhat more complicated."
Determining who gets paid what?
1817. PseudoErasmus - May 22, 1998 - 4:00 AM PDT
FTC
You suffer from the delusion at adequacy.
Slackjaw
I have the Gates thread, where Selene makes the idiotic faux pas with Bellman's inequality. Alas, it's stateside: you'll have to wait 'til late July or early August!
1818. PseudoErasmus - May 22, 1998 - 4:01 AM PDT
Shit, nothing like messing up a barb.
FTC
You suffer from the delusion OF adequacy.
1819. CalGal - May 22, 1998 - 4:15 AM PDT
Pseudo,
You, OTOH, suffer from adequate delusions. Can't you come up with some better ones? Maybe they'd make you more pleasant to deal with.
1820. AdamSelene - May 22, 1998 - 4:18 AM PDT
Slackjaw,
"Selene is the error in any regression model. Pay him no mind."
Cute. But I prefer the word "gadfly."
1821. AdamSelene - May 22, 1998 - 4:29 AM PDT
Slackjaw,
*sigh.* After a short nap (yes, I do sleep) it appears that you are technically correct while still totally missing the point. Yes, one may design a profit-maximizing payment scheme based on effort even in one shot deal. However, the point was in relation to Elliot's insistence that such things be done because they're moral, or some such implication. You're objective function (profit-maximizing) already concedes a different goal. Just because you condition pay on effort does not negate your ultimate goal of maximizing profit.
This is along the lines of what I originally meant by stabbed in the back. I make a technical slip (apparently assuming non-one-shot situations when that's not necessary) when expounding a preportedly economic viewpoint, and instead of being validated and having an economist join in with more information, I get trounced for my efforts.
CalGal, Thanks for the moral support.
1822. AdamSelene - May 22, 1998 - 5:11 AM PDT
*...but I think I'd like your immoral support next time...*
*g*
1823. elliot803 - May 22, 1998 - 9:00 AM PDT
Stumbo:
"Re point #1: just to make sure we're on the same page -- do you believe that some people happen to be lazier than others? (I know I'm lazier than most.) If you say yes, we'll take it from there. If you say no, I give up."
Yes. Do you believe that people have no conscious control over the amount of effort they make?
"Re point #2: no; under that scenario, people are being paid merely to be part of the project, regardless of how much effort they actually put into it. But how much they get paid this time depends on the results they got last time, and how much they will get paid next time depends on the results they get this time."
They're still being paid for effort rather than results. And pay is not independent of effort. Ever heard of overtime?
1824. wexxford1 - May 22, 1998 - 9:50 AM PDT
This bubble economy got a little prick from the shocking...shocking performance of this Viagra thing.In the deregulated society,will corporate America give you any old hope and hype.What about all those flacks,hacks,editors and reporters who happily sold Viagra to fill their begging bowls? Will they be suspended, fired, horsewhupped by Imus? We pray that gab-champ Pseudo ain't a Viagra customer.Then we'd maybe miss his pouting about how he invented game theory,not the great old Johnny Van sixty years ago. Carry on prattling for the weekend you dreamy bubble economy fraygrants. Easy on the game theory.And lay off that Viagra , will ya?
1825. thoughtful - May 22, 1998 - 12:24 PM PDT
FTC, yeah, lump of labor. Same thing. Only I like my box analogy better -- and that's a purely objective opinion. }:-)
chloel Message #1668 you get the award for the most creative typo of my name yet.
slackjaw, re stabbed in the back by an economist, not to worry ... an economist always first *assumes* there's a knife. }:-)
1826. thoughtful - May 22, 1998 - 12:28 PM PDT
elliot, re people getting rewarded for less or no effort... life's unfair. Deal with it.
Calgal, re teams, I've been on teams where peer reviews were used to parse the team reward, with interesting results.
1827. CalGal - May 22, 1998 - 12:34 PM PDT
Hey, thoughtful!
Teams determining rewards. Anarchy. The boss does it and fuck 'em if they can't take a joke.
1828. Slackjaw - May 22, 1998 - 12:51 PM PDT
Selene:
Is that what the backstabbing business was about? Oh, sorry about that. Had I known anything elliot was saying I would have included the caveat you were looking for.
1829. Slackjaw - May 22, 1998 - 12:52 PM PDT
Selene:
your regression models contain gadflies?
1830. Slackjaw - May 22, 1998 - 12:53 PM PDT
CalGal (Message #1816):
yeah. I realize in practice the boss does it. I'm talking about the profit maximizing allocation.
1831. thoughtful - May 22, 1998 - 12:56 PM PDT
Cute, calgal. The key to team rewards is, if the team trashes someone, just don't ever get on the same team with them again!
}:-)
1832. CalGal - May 22, 1998 - 1:14 PM PDT
Thoughtful,
Yes, but in the system FTC is talking about (I think), where the bonuses are handed out equally, the damage has already been done.
Also, inertia is a powerful force in the workplace. Useless people can get rewarded for a long time before the truth is out in normal circumstances. When they are helped along by bullshit like "peer reviews" (where many people are loath to be honest) or bonuses that are applied equally--it just makes things worse.
I'm not speaking out of jealousy; I'm not one of those whiners who complains that "other people don't work as hard as I do". In fact, I barely work at all. And am rewarded amply.
But considering the idea as a system, the very notion of rewarding effort over quality just offends me to my core.
1833. thoughtful - May 22, 1998 - 1:19 PM PDT
If rewarding effort offends you, there's a major corporation that rewards failure. What they've found is that the hardest things for managers to do is to call it quits on a project that's headed for failure. Instead, they can't abandon their "baby" and keep pouring good money after bad trying to make it work. So this company actually rewards folks for calling it quits on their project, and they even use a cannon which the team sets off to mark their failure and the cannon can be heard around the company so everyone knows what they did.
1834. elliot803 - May 22, 1998 - 1:23 PM PDT
Thoughtful:
"elliot, re people getting rewarded for less or no effort... life's unfair. Deal with it."
I know life's unfair. That's why we have things like government redistribution of income--to make life less unfair. Deal with it.
1835. elliot803 - May 22, 1998 - 1:28 PM PDT
CalGal:
"But considering the idea as a system, the very notion of rewarding effort over quality just offends me to my core."
So your idea of economic justice is "winner takes all," right? And the idea that those who finish in second or third place, let alone in ten-thousandth place, should get some compensation commensurate with their effort is "offensive" to you, right?
It amazes me that you have the nerve--or maybe it's just naivete on your part--to call yourself a liberal.
1836. Stumbo - May 22, 1998 - 1:30 PM PDT
Elliot, Message #1823:
Re #1: OK, good. Let me continue.
Some people enjoy reading, writing, and thinking more than others do. Some people enjoy lifting or building things more than others do. "Laziness" is the common term for not liking physical or mental work as much as the average person does.
How much a person enjoys doing physical or mental work is determined either by genes, or by upbringing. (It's near impossible to make oneself like something that one doesn't.) So, if person A is lazier than person B, then making the same amount of effort is harder for person A than for person B -- through no fault of A's.
Does it not follow that rewarding effort, regardless of laziness, is just as immoral as rewarding results, regardless of effort?
Re #2: you have simply restated your earlier assertion, without addressing what I wrote. Please do so, if you're not too lazy. ;-)
1837. Stumbo - May 22, 1998 - 1:36 PM PDT
(BTW, I agree with #1835. CG has way too much common sense to be a real liberal.)
1838. elliot803 - May 22, 1998 - 1:41 PM PDT
Stumbo:
You didn't answer the question. Do you believe that people have some conscious control over how much effort they put into reaching some goal? I assume that you do. Therefore, people who make more effort deserve more credit than people who make less effort, right? This is completely different from genetic endowment, which is not under conscious control.
And I did address your second point; I pointed out that it was irrelevant.
1839. CalGal - May 22, 1998 - 1:49 PM PDT
Thoughtful,
Message #1833
Oh, no, that's terrific. That's truth. I'm big on truth. The problem is when you reward effort, you're not being truthful. You're pretending that everyone is equal.
(not "you" specifically, you understand.)
1840. thoughtful - May 22, 1998 - 1:51 PM PDT
elliot, think about what you're saying. If we were to reward only effort, our economy would be so unproductive that there would be very little with which to reward anybody. If I'm paid for performing the greatest effort, then I must pick an occupation for which I'm least suited and try my best to do it though I will fail miserably at it. The same would be true for everyone else, and life would be very poor indeed. So those who enjoy writing books, e.g., and find they can do it with relative ease because of their training and talent would be unable to spend their days pursuing an occupation which brings them happiness because it doesn't require sufficient effort. Instead, to receive the maximum reward, they must choose an occupation for which they are most unsuited and spend their days struggling to do hated tasks at which they will certainly fail.
Sounds wonderful. As FTC said, if you can get anyone to join you in such a world, good luck.
1841. CalGal - May 22, 1998 - 1:58 PM PDT
Stumbo, (g) and smooch.
However, I think "liberal" means (and this is off the top of my head and *not* the classic definition but the one in common use, if ptboya is reading):
belief in a centralized government, protection of people who can't protect themselves, assurance that market forces don't cause absolute injustice, and a concern about too much power in the hands of too few.
It's just that my central government would be small, I think people need to be responsible for their own actions and abilities, absolute injustice isn't the same thing as a reasonable application of supply and demand (in this instance, smart people get paid more because they're worth more), and I don't think too much power is *inherently* bad, it just needs to be monitored.
If it's really important, I'm always for letting the government solve it than market forces. I think that, in the end, makes me more liberal than otherwise? But I'm certainly not as sure of my politics as I was before I joined the Fray.
But RickC counts me as one of his own. And he's sure as hell liberal.
1842. elliot803 - May 22, 1998 - 2:06 PM PDT
Thoughtful:
I have never suggested that we reward ONLY effort. I am saying that justice demands that effort be one of the criterion we use in judging how reward should be allocated. I accept the need to reward those who exhibit excellence, independently of how much effort they put into it, in the interests of economic efficiency. But only to a point. I think most people make this kind of tradeoff tacitly when they think about how much people at various levels of income and wealth should pay in taxes and how much they should receive in services. And that's why we have progressive systems of taxation and spending, with the rich paying more in taxes and the poor receiving more in benefits. Most people realize that the rich deserve less of what they make than do the poor, and so the rich should pay more in taxes.
1843. CalGal - May 22, 1998 - 2:08 PM PDT
"Most people realize that the rich deserve less of what they make than do the poor, and so the rich should pay more in taxes."
(CalGal sputters helplessly, realizes it would be pointless, and subsides, going back over to defend Elliot from the bastard Vic in the Religion thread.)
1844. elliot803 - May 22, 1998 - 2:14 PM PDT
CalGal:
Huh? Do you believe that most Americans think people should pay the same amount in taxes and receive the same amount in government services regardless of income?
1845. CalGal - May 22, 1998 - 2:15 PM PDT
Message #1844 and the snippet quoted from Message #1842 do not say the same thing. Can't get from one to the other.
1846. elliot803 - May 22, 1998 - 2:27 PM PDT
CalGal:
Well, one's a statement and the other's a question, so, no, they don't say the same thing. The question arises from your apparent incredulity at the statement. It seems entirely uncontroversial to me.
1847. CalGal - May 22, 1998 - 2:31 PM PDT
"The question arises from your apparent incredulity at the statement. It seems entirely uncontroversial to me."
LOL.
(not in any disrespectful way, mind you, just a "that's my Elliot!" So to speak--about the "my", I mean. BTW, I left a post for you in Movies/Television.)
I meant that my incredulity over the one statement was justified but *didn't* imply that I disagreed with your followup question. They're not the same thing.
You still should apologize, dammit.
1848. Seguine - May 22, 1998 - 3:42 PM PDT
"Most people realize that the rich deserve less of what they make than do the poor, and so the rich should pay more in taxes."
No, most people realize that after necessities are met the rich can afford to part with more of what they have, and so the rich are better suited than others to pay a greater percentage of their income in taxes.
But who knows what "deserve" means in your lexicon.
1849. elliot803 - May 22, 1998 - 4:08 PM PDT
Seguine:
Well, I don't see that saying "the rich can afford to pay more" is a whole lot different than saying the rich deserve to pay more. I think most people understand that the rich often become rich in large part because of a privileged background, innate talent, luck, and other factors that they don't really deserve credit for.
1850. FreeToChoose - May 22, 1998 - 4:09 PM PDT
CalGal
> Yes, but in the system FTC is talking about (I think),
> where the bonuses are handed out equally, the damage
> has already been done.
What equal bonuses? Time out.
First, I want to emphasize that bonuses average 40% or so, therefore less than 30% of total comp (although very important at the margin). The type of activities associated with "effort-based" rewards are less than 10% of the bonus, probably less than 5% for most, so we are talking about a relatively small portion of comp.
Given that, team members do *not* share equally. In the perfect system, when I ask someone to sign up for a team, we agree on a percentage in advance. I tell them what I would like them to do, eg. What part of the proposal to write, whether they will be part of the presentation team, and then tell them what percentage share of the reward I think their effort is worth. If they don't think I'm offering enough, they can tell me to take a hike (if they are smart, they will find a better way to phrase it.) In practice, many of the allocations are determined after the fact, and adjustments can be made to the agreed percentage if someone doesn't deliver, or does deliver more than expected.
1851. FreeToChoose - May 22, 1998 - 4:16 PM PDT
CalGal
Elliot "Most people realize that the rich deserve less of what they make than do the poor, and so the rich should pay more in taxes."
CG
"(CalGal sputters helplessly, realizes it would be pointless, and subsides, going back over to defend Elliot from the bastard Vic in the Religion thread.)"
ROFL
I actually copy and pasted Elliot's post into Word, and began composing a response, then realized the futility and returned to see your post.
Exactly.
1852. AdamSelene - May 22, 1998 - 4:17 PM PDT
Slackjaw,
If you were a gal, I'd smooch you. Hell, I may do it anyway. Now I know the intersection of nice guys and economists is not empty. Whew.
1853. FreeToChoose - May 22, 1998 - 4:20 PM PDT
elliot803
> Well, I don't see that saying "the rich can afford to pay
> more" is a whole lot different than saying the rich deserve
> to pay more.
I agree with you. Both statements are morally bankrupt.
1854. AdamSelene - May 22, 1998 - 4:21 PM PDT
FTC,
That sounds like a plausable approach. But only to the extent that it's NOT based on effort - it's based in intermediate results. Just because you don't win the contract, doesn't mean that a particular section of the proposal wasn't a real beauty.
There's primary reinforcers and there's secondary reinforcers. Just because a job was won through political connections is no reason not to reward excellent work. Just so long as it's not based on number of hours logged into the system or some measure of pure effort (ha!) which is unrelated to output.
1855. elliot803 - May 22, 1998 - 4:22 PM PDT
FreeToChoose:
You are under the persistent delusion that most people share your libertarian views on economic issues. They don't. That's why we live in a country where the government takes money from the rich and gives it to the poor.
1856. AdamSelene - May 22, 1998 - 4:25 PM PDT
elliot-robbing-hood,
Thanks for that last comment. I've never seen a clearer statement of prejudice and bigotry. "Rich equals evil and deserving of punishment. Success is bad, or at least, is not possible without being evil."
Now I need not feel like I'm missing anything by skipping your posts.
1857. elliot803 - May 22, 1998 - 4:36 PM PDT
AdamSelene:
I've pretty much dismissed you as a hopeless ideologue and intellectual lightweight. Your invariable response to any argument from fairness is to dismiss it as an "attack" on the rich.
Didn't you get enough of a thrashing over in Politics?
1858. AdamSelene - May 22, 1998 - 4:39 PM PDT
What was that noise? Did someone hear something?
1859. AdamSelene - May 22, 1998 - 4:41 PM PDT
elliot - instant regrets. I'm sorry I stooped to that level. Forgive me.
p.s., regarding politics, the fat lady ain't sung yet.
1860. FreeToChoose - May 22, 1998 - 4:47 PM PDT
AdamSelene
"That sounds like a plausible approach. But only to the extent that it's NOT based on effort - it's based in intermediate results. Just because you don't win the contract, doesn't mean that a particular section of the proposal wasn't a real beauty."
True. I am probably overstating what we do to call it effort based. But that is what we are calling it.
We recently worked on a major proposal for a company that we lost. However, the proposal was very well done; we are using it as a model for other bids, and we are rewarding the people that put it together.
1861. FreeToChoose - May 22, 1998 - 4:53 PM PDT
elliot803
"You are under the persistent delusion that most people share your libertarian views on economic issues. They don't. That's why we live in a country where the government takes money from the rich and gives it to the poor."
Don't be such an idiot. I know all too well that many people don't accept libertarian principles. Many people are lazy and prefer handouts from the government. Some are deluded and think that the government can determine fairness better than a marketplace. That's why I spend time trying to convince people. It takes time, especially with you around. But I'm patient. And I'm optimistic. So I think that in the long run, people will prefer a society in which they control more of their lives. You are free to try to convince people that a government can do better. I'm comfortable that showing people the wonderful results of government will make them realize that government should be limited to certain functions. My biggest problem is that it takes people who think.
1862. Msivorytower - May 22, 1998 - 5:43 PM PDT
Well, while I may not go the stretch that Elliot does in defending a progressive tax structure, there are some very basic reasons I prefer it.
On both the benefits received *and* ability to pay principles, one could make a compelling argument that the rich really should pay more in taxes, in percentage and absolute terms.
1) The rich have more disposable income, therefore a higher tax rate hurts them *less* from the stand point of being able to purchase consumables to live;
2) The rich receive more in benefits from the government (all levels, actually), and so, from a benefits received aspect, they should pay more.
I can hear the screams now. How do the rich receive more in benefits?
-defense of their economic interests both at home and abroad (no insignificant benefit, that)
-protection in law and deed of all property rights, the higher the value of the property protected, the more the benefit;
-subsidies for home ownership, education, asset building, etc, primarily through tax laws advantageous particularly to them;
-subsidies for the costs of road maintainance, transportation costs, fuel costs;
-economic policies designed to allow them maximum freedom to accumulate wealth without fear of reprisals (anarchy and revolt);
-government programs and spending designed to foster their economic well being and expand their wealth base (all defense spending, infrastructure rebuilding, corporate subsidies, etc fall under this).
1863. Msivorytower - May 22, 1998 - 5:47 PM PDT
Btw, while I prefer a progressive tax system, I think the effective tax rates should be set high enough to allow for government to meet its obligations, but not so high as to stifle economic incentives.
Our current system seems to be set at around those levels, although the marginal tax rates at the top could be somewhat higher, IMO.
1864. Slackjaw - May 22, 1998 - 5:50 PM PDT
FreeToChoose:
"Some are deluded and think that the government can determine fairness better than a marketplace. That's why I spend time trying to convince people...My biggest problem is that it takes people who think."
And you believe that your intellectual opponents in the fray lack that ability? Or that we just don't do it when reading your posts?
You and Selene have slightly different approaches, at least lately. To him the only necessary justification of markets is the moral character of the exchange process. He has eschewed the efficiency concept (even though he doesn't really get it) that underlies your beliefs about the desirability of market *outcomes* in addition to the moral force of the *process*. Selene's is wrongheaded but is immune to criticisms that market outcomes cannot always be expected to live up to the best case scenarios that Friedman and his old-style Chicago friends, not to mention the Austrians, are famous for.
No, FTC, your biggest problem is that you forget or ignore that markets can be guaranteed to lead to the desirable outcomes you and I like only under certain special conditions.
1865. FreeToChoose - May 22, 1998 - 5:54 PM PDT
Msivorytower
"On both the benefits received *and* ability to pay principles, one could make a compelling argument that the rich really should pay more in taxes, in percentage and absolute terms."
I disagree that the ability to pay argument is compelling, but wrt to the broad theme of your post, it's a minor nit. Perhaps this will surprise you, but I largely agree with you.
I agree that:
• The rich should pay more, both in absolute and percentage terms (OK, a minor quibble. "Should" is a strong term, equivalent to a moral or ethical argument. I don't mean it that strongly. I mean they should as it is politically idiotic to substantively discuss the alternative.)
• The rich receive more in benefits from the government than all others.
• Every item on your list is delivered by government and more to the rich than the poor (although there are two I would give up)
1866. Msivorytower - May 22, 1998 - 6:02 PM PDT
Well, hell, that was easy FTC.
Tell me, why were you arguing with Elliot then? Or did I miss something?
1867. FreeToChoose - May 22, 1998 - 6:04 PM PDT
Slackjaw
> And you believe that your intellectual opponents in the
> fray lack that ability?
Some of my opponents lack that ability. Few who deserve the appellation "intellectual" are unable to think.
> No, FTC, your biggest problem
> is that you forget or
> ignore that markets can
> be guaranteed to lead to the
> desirable outcomes you
> and I like only under certain
> special conditions.
I'm amazed at the predilection of some Fraygrants to tell others what they think. As an expert in game theory, how should these people react when the most common response is that the attempt fails?
I neither forget, not ignore it. I simply don't believe it. Markets are perfect under extremely rare circumstances. Markets are preferable to the alternatives in a broad range of circumstances.
I accept that the Economist's assertion that a centrally planned economy can outperform a market-based one. But just like the fact that a benevolent dictatorship is far better than a democracy or even a democratic republic, I'll take my chances with a market economy and a democratic republic because bad government planning and bad dictators are far worse. A risk-reward tradeoff that you might appreciate.
1868. FreeToChoose - May 22, 1998 - 6:06 PM PDT
Msivorytower
"Tell me, why were you arguing with Elliot then? Or did I miss something?"
I'm fighting the urge to tell you why. Let's just say that even if Elliot agrees with your post, the devil's in the details.
1869. FreeToChoose - May 22, 1998 - 6:10 PM PDT
Slackjaw
"No, FTC, your biggest problem is that ..."
My SO informs me that you aren't close to identifying my biggest problem, but I am refusing to post her long list of examples.
(g)
1870. Slackjaw - May 22, 1998 - 6:13 PM PDT
"Markets are perfect under extremely rare circumstances. Markets are preferable to the alternatives in a broad range of circumstances."
Please tell me your metric of "preferable."
There is no sense in which market allocations become more efficient as the fundamentals get "closer" to the conditions for perfection (e.g., as production sets become "more convex"). You have no idea what is preferable from an efficiency standpoint when both markets and governments fail.
If you wish to turn to moral justifications of the process itself, fine, but you cannot base your conclusions on any rigorous notion of efficiency.
1871. Slackjaw - May 22, 1998 - 6:15 PM PDT
By what metric of performance do you think anyone claims centrally planned or mixed economies outperform pure market economies?
1872. FreeToChoose - May 22, 1998 - 6:15 PM PDT
Msivorytower
"Btw, while I prefer a progressive tax system, I think the effective tax rates should be set high enough to allow for government to meet its obligations, but not so high as to stifle economic incentives.
Our current system seems to be set at around those levels, although the marginal tax rates at the top could be somewhat higher, IMO."
You may be literally correct that a higher marginal rate may be possible without *stifling* economic incentives. I would prefer to *optimize* economic incentives, consistent with a broadly equitable tax structure. I think this could be done with top marginal rates somewhere between 10% and 20%. (Stop laughing).
1873. Slackjaw - May 22, 1998 - 6:17 PM PDT
what does it mean to optimize economic incentives? Incentives for what? Are you trying to maximize GDP or something?
1874. Seguine - May 22, 1998 - 6:17 PM PDT
"Well, I don't see that saying "the rich can afford to pay more" is a whole lot different than saying the rich deserve to pay more."
But that's not what you said. You didn't say that the rich deserve to pay more, but that they should pay more. And I have no difficulty with that assumption. Like "most people", I understand that the rich can afford to part with a larger percentage of their income. But that says nothing about whether the rich are inherently more deserving of their money than anyone else, per your statement, "the rich deserve less of what they make than do the poor..."
Personally, I wouldn't make such an assertion. I have no idea what some income-category of people deserve, even if I think I know what they or we must sacrifice for some greater good.
1875. FreeToChoose - May 22, 1998 - 6:18 PM PDT
Slackjaw
Ask the Economist. They claimed it, not me. I'm just willing to accept it.
1876. FreeToChoose - May 22, 1998 - 6:21 PM PDT
Slackjaw
"Are you trying to maximize GDP or something?"
OTTOMH, GDP per person, adjusted for pollution. How much difference does it make?
1877. Msivorytower - May 22, 1998 - 6:22 PM PDT
Yes, lets not go there Seguine
Attempts to determine who *deserves* what is a black hole, and completely dependent on where one is within the pecking order of wealth and income.
Slack
I don't know what FTC meant, but I mean incentives among the wealthy to continue to invest and spend within the economy at levels sufficient to maintain economic growth.
1878. Slackjaw - May 22, 1998 - 7:02 PM PDT
FTC:
Outperform is wrong generally, though will be correct for a mixed economy in a world with some information asymmetry.
Which is to say that the best case scenario with some planning dominates the best case purely decentralized scenario in efficiency terms.
1879. Slackjaw - May 22, 1998 - 7:08 PM PDT
"GDP per person, adjusted for pollution."
Well, in that case, do us a favor and break every window you come across.
1880. FreeToChoose - May 22, 1998 - 7:33 PM PDT
Slackjaw (from Politics)
> Why on earth would
> anyone oppose such an endeavor?
Because the result of codifying the principle may provide lawyers in a malpractice claim with ammunition.
Lawyer: "Mr. Actuary, I see that the Principles of Actuarial Science discuss Information Asymmetry. Can you please tell the court how you incorporated Information Asymmetry into your analysis of the solvency of this company? "
Mr. Actuary: "Hem, haw"
Lawyer: " I think I have shown that this actuary has failed to apply the basic principles of his profession. I think the jury can see that we must lay the blame for this multi-million dollar insolvency squarely at the feet of this incompetent boob."
1881. FreeToChoose - May 22, 1998 - 7:37 PM PDT
Slackjaw
"Which is to say that the best case scenario with some planning dominates the best case purely decentralized scenario in efficiency terms."
This was the point of the Economist article. I agree, with the important caveat that it depends on *who* is doing the planning. I'm chary of government planners, although I give Mr. Greenspan good marks. I'm not sure how to guarantee that we get his clone next time around.
1882. FreeToChoose - May 22, 1998 - 7:39 PM PDT
Slackjaw
"Well, in that case, do us a favor and break every window
you come across."
Good point. I should have checked in with Mr. Hazlitt before posting. Luckily, I added the qualification to cover the possibility that I might miss some important aspects.
1883. AdamSelene - May 22, 1998 - 7:43 PM PDT
MsIT,
Well, I don't “prefer” a progressive tax structure – I just think people should pay for what they receive. I do happen to agree that wealthy individuals (regardless of income) receive more benefits from government, just as you listed, and should therefore pay more. I've said this many times, so I'm sure it's not a shock.
1884. Slackjaw - May 22, 1998 - 8:06 PM PDT
FTC: interesting about actuarial malpractice. What do you guys use for textbooks? Can't they just get ahold of them and use them for the same purpose?
I share a subscription to The Economist with a friend but I didn't see the article you're talking about--which one was it?
I agree that it matters who does the planning. I shudder at the thought of some of my former classmates writing their ideology into administrative rules.
1885. FreeToChoose - May 22, 1998 - 8:18 PM PDT
Slackjaw
> FTC: interesting about actuarial malpractice. What do
> you guys use for textbooks? Can't they just get ahold of
> them and use them for the same purpose?
We have one textbook, that is, one textbook solely on actuarial issues. We borrow a number of textbooks for economics and other topics. Most of the reading is from individual papers. Having written some of them, I'm sure that the lawyers would find it gobbledygook (g).
More seriously, lawyers do use specific articles on occasion. But because each article is usually fairly specific, there is often an "out". A practitioner can claim that the paper doesn't apply in *this* specific circumstance. However, the Principles are intended to apply broadly, to the entire breadth of the science. In fact, one of the difficulties is that someone will propose a principle that applies to all of the science as that person knows it, only to learn that it doesn't apply to some other practice area.
"I share a subscription to The Economist with a friend but I didn't see the article you're talking about--which one was it?"
Oh, probably a year or two ago. Sorry, I should have saved it, but I don't think I did. I'll check at the office; I have saved a few notable articles, although I usually realize the importance of an article months after reading (and discarding) it.
1886. CalGal - May 22, 1998 - 8:33 PM PDT
Hey, FTC.
Adam said what I was going to say--"effort-based" isn't how I would describe your situation.
1887. FreeToChoose - May 22, 1998 - 8:44 PM PDT
CalGal
Yeah, it took me awhile, but I finally realized that I was describing something different that you were. Sorry, I meant to post that explicitly, but I said it obliquely in my post to Adam.
1888. ptboya - May 22, 1998 - 9:06 PM PDT
I think *I* deserve the highest reward for making the supreme effort to remain disengaged from this conversation. I now blow my bonus.
Elliot, the tough question to answer in your "Effort Utopia" is...how does one measure the effort that is to be rewarded? Is it simply the number of hours logged? Do we watch for physical signs like clenched jaws etc.? Obviously these are rhetorical questions, but I just don't get it. If what you're saying is simply that people at all strata work hard and deserve the reward of a living wage, then it would seem much easier to just redistribute income through graduated taxation as we (sort of) do presently.
1889. Slackjaw - May 22, 1998 - 9:13 PM PDT
re. 1888--
information asymmetry yields its head again...
1890. Slackjaw - May 22, 1998 - 9:13 PM PDT
make that rears. yikes.
1891. ptboya - May 22, 1998 - 9:20 PM PDT
Yes, I see what you mean. Somehow my screen opened to sometime earlier this afternoon, which I thought was now. A thousand apologies.
1892. Slackjaw - May 22, 1998 - 9:39 PM PDT
ptboya:
Are you talking to me? Apologize? No need to do that. The more the merrier. Besides, I don't think I have specifically addressed that issue to elliot.
1893. ptboya - May 22, 1998 - 10:02 PM PDT
Actually I see that you share some of Elliot's leaning on this issue if not his specifics. In arriving at an optimal work environment which is part effort based and part piece-work based, how would one measure the effort involved, in practical terms? And wouldn't this effort of measuring in some respects tend to deoptimize in terms of profit maximization? It's really a practical question.
1894. Stumbo - May 23, 1998 - 12:51 AM PDT
Elliot, Message #1838:
"Do you believe that people have some conscious control over how much effort they put into reaching some goal? I assume that you do. Therefore, people who make more effort deserve more credit than people who make less effort, right? This is completely different from genetic endowment, which is not under conscious control."
But, I repeat: suppose that A is naturally (as a result of his genes and/or upbringing, neither of which one generally has control over) lazy, while B (due to his different genes and/or upbringing) is a workaholic. Then it is harder for A to make the same amount of effort as it is for B. (Both have conscious control over their actions; this allows A to force himself to make said effort, because he knows he'll otherwise get fired -- whereas B *enjoys* making the effort.) So, shouldn't A get more credit (and, presumably, reward) than B?
CG, Message #1841:
"If it's really important, I'm always for letting the government solve it than market forces. I think that, in the end, makes me more liberal than otherwise?"
Depends on what you consider "really important." It certainly doesn't make one a liberal to believe that national defense shouldn't be completely privatized, for instance.
1895. Slackjaw - May 23, 1998 - 12:55 AM PDT
pt:
my impression is that elliot is approaching this from a purely ethical standpoint, describing how compensation would work in his personal utopia. I have been talking about how profit maximizing firms structure their contracts when they cannot observe effort and the relationship between employee effort and output is noisy--affected by random variation.
I suspect a clever employer could think of ways to monitor employees; anything up to video cameras would work in some respects.
The interesting case to me is when, after taking those measures, effort (or "effort," more accurately) is still fundamentally unobservable. This of course poses a problem for the employer when the employee has different goals--presumably, they'll do whatever the hell they want, UNLESS steps are taken in contract design to account for this. The punch line is that by forcing the employee to take a facsimile of the risk s/he incurs, the employer can make their interests coincide. That is, the employee can be induced to take the employer's preferred effort level not because the boss and his minions are constantly watching, but because the contract makes it in the best interest of the employee to do what the boss wants, even when nobody is looking.
This involves some inefficiency relative to the perfect observability case--under unobservable effort, the employee is paid more than is necessary to induce high effort when it is observable. Nonetheless, the contract is the best available from the employer's perspective, given the very real constraint that he must align the worker's goals with his own (called the incentive compatibility constraint).
1896. Slackjaw - May 23, 1998 - 1:02 AM PDT
for those with scorecards, this is called a principal-agent game. It's a special case in the class of mechanism design problems.
1897. JustSayYo - May 23, 1998 - 6:54 AM PDT
Couldn't
1898. JustSayYo - May 23, 1998 - 6:54 AM PDT
stop
1899. JustSayYo - May 23, 1998 - 6:54 AM PDT
myself
1900. JustSayYo - May 23, 1998 - 6:54 AM PDT
1900 immature run number two in as many days, complete.