How to reward people fairly? 3

The usual response to this question is, let the market decide. What could be fairer? Well, maybe a lot. The other side of the argument is, does it matter whether it is fair, because it will be more efficient? So, do you think the market is fair? Do you think it is the most efficient?  Efficient for whom? Who benefits? What does the data say? Here we find a rather big problem: what data do we have that is not complicated by extraneous issues? Salaries for common jobs tend to be preset, and are offered to the applicant on a take it or leave it basis. In some cases, a negotiation takes place, but usually the applicant is in a very weak position, at least with regards to the necessary knowledge of what could be obtained. So perhaps we should look at special individuals.

Amongst the biggest earners are the very top entertainers. Singers who earn their money through royalties and concert tickets have clearly succeeded in a market, and what they get may be seen as fair, although they may complain about the rake-off that the studios, the organizers, promoters, etc take. Everyone knows about the very high payments commanded by successful movie stars, but, the argument goes, the studios do not have to pay them. They could hire much cheaper actors, and some very successful directors do just that. Not only that, but they turn the “Nobodies” into stars. However, for many producers, the “star” is hired to give credibility to the production, and as likely as not, to overcome other obvious deficiencies, and hence the star is a means to sell lots of tickets. If the star is an important component of financial success, then it is only fair that the star gets the proper reward for his/her efforts. Market forces are working, and only those steeped in envy can complain. Is that right?

A similar situation occurs for sports stars. Nobody forces anybody to pay them that much, and they bring in the crowds, so is it not only fair that they get the appropriate rewards? Maybe, but maybe not. I saw recently an account of Spanish football. In the top league there are two or three powerhouses of clubs who acquire, at considerable expense, most of the best players, and the rest have to make exorbitant payments to get lesser players. The only doubt as to who the winning club will be lies in which of the top three will prevail. So, why do I think this is unfair? Well, to start with, if the report I saw is true, it appears that the Spanish football clubs borrow huge amounts from banks, who then forgive the debt, and furthermore, it appears they do not pay taxes. Now, those same banks are evicting people who, due to the financial crisis, cannot meet their mortgage payments, but at the same time, the mortgages continue accruing debt. In short, the poor evictee can never get out of debt, yet gets absolutely no benefit from the money he later pays. That is how serfdom grew! Then, by not paying taxes, the government gets less income and fires some further workers.

Unfortunate, you say, but the worker should not have gotten into debt. Perhaps, but who amongst us has never got into debt? I know in my youth I took out a mortgage to buy a house, and I regarded that as a very good investment because now, in my later years I do not have to worry about rent, eviction, or any of those other problems. Of course one obvious solution is to sell the house or apartment, and use that money to repay the debt. That is a great idea, except that apparently there was an immense splurge of property development in Spain, and I have seen images of rows upon rows of partially finished buildings, and empty finished ones. In this economic climate, there is simply no market because nobody can afford to buy enough of the housing. Supply has greatly exceeded any reasonable demand, and that has happened elsewhere in the world as well. Now, the question is, who was responsible? I would argue, in part at least, the bankers, because they knew how much money was being sent out on housing mortgages, and they knew what the prospects for repayment would be like. The question then is, is it fair that the causes of such crises walk away with fat bonuses and an incredibly affluent lifestyle, while the victims of their incompetence have their lives ruined?

Of course, you may say the world does not have to be fair. Get real! Nevertheless, suppose someone burgles your house and steals from you. Do you agree that is unfair? If so, do you agree the burglar should be punished? If so, why is taking from innocents through devious financial means any better, apart from the fact that it is sufficiently legal you can get away with it? Any thoughts?