Some Chicago Boyz know each other from student days at the University of Chicago. Others are Chicago boys in spirit. The blog name is also intended as a good-humored gesture of admiration for distinguished Chicago School economists and fellow travelers.
This article [h/t Instapundit] shows that the U.S. has a more progressive tax code than the democratic-socialist states of Europe.
Such a state of affairs should not come as a surprise. Our own history shows that the very wealthy benefit from leftist policies of high tax rates, “targeted” taxation and industrial policy.
(This is a continuation of my post on the election and the economy from several days ago. At that time, I focused on energy and trade; in this update, I also talk about small business, the demonization of entire industries, the micromanagement of innovation, the proposed elimination of the secret ballot in union elections, and corporate tax policy.)
In my previous post, I explained why business spend a great deal of money on executive pay and why the rest of us should be glad they do.
However, this raises the question: Why do we have to spend so much money to hire a small number of decisions makers? Even if the decisions they make determine the success or failure of entire businesses why does it cost millions to hire them? After all an executive doesn’t need the money to actually make decisions. In theory, an executive will make the same decision if you pay him $100,000 a year as he will make if you pay him $1,000,000.
So why do greedy capitalists pay millions to hire executives when in theory they could get the same decisions for less money?
The answer is deceptively simple:You have to pay an executive more than he could make running his own private company.
Life aboard ship in the age of sail was brutal, even by the standards of the day. Ordinary sailors worked in horrific conditions for months on end for little pay and often for nothing more than just a stake in the profits of the voyage.
Easily, the cushiest job on a ship was that of navigator. Navigators were quite often hired guns who had no other duties. A navigator often needed to work no more than four hours a day. He would come on deck two or three times a day to take sightings, then return to his cabin for an hour’s worth of calculations. Compared to the physically taxing, mindlessly repetitive and dangerous work of a sailor, navigators did nothing and risked nothing.
Yet navigators often received as much as much as 25% share in the profits in a voyage. Even when they worked for pay, they received a wage many, many times that of sailors who did much more arduous and even critical work. Why did those who owned shares in a voyage, from the cabin boy to the landlubber investors tolerate paying the navigators so much?
The answer is obvious: if the navigator made a mistake, it didn’t matter how hard everyone else on the ship worked or how competently they did their jobs. The skill of the person doing the navigating determined the success of the voyage or even if anyone survived. People paid navigators a lot because if they didn’t, it didn’t really matter how much they paid anyone else.
This morning on the radio I heard a promotional advertisement for Feed the Pig. I have heard things about this site before and decided to check it out. It is outstanding. They have calendars so you can see ways to save money throughout the year, and there are many tips on how to pinch pennies.
Basically the concept is to teach people how to save, knock down their debt, and generally help them to not waste money (things that many modern day Americans are horrible at). I can’t really see a downside to this. The site is sponsored by the American Institute of CPAs. I am not sure why they put up the site, but I wholeheartedly support it.
I give the site a big thumbs up, but think I will give their choice of advertising venues a small thumbs down. I was reminded this morning of Feed the Pig while listening to Bloomberg Radio on XM on the way in to work, getting my business news for the day.
**Quick aside: I have three choices of business news to pick from on XM: Fox Business, CNBC and Bloomberg. I choose Bloomberg because it is just the facts, with interviews sprinkled in – and the interviews are with interesting and smart people. In addition, the interviews are always respectful and low key even if people are disagreeing, unlike some of the other places where there are a bunch of idiots yelling and screaming at each other. In other words, Bloomberg Radio seems more professional to me.**
I really don’t think that anyone who seeks out Bloomberg Radio doesn’t understand the simple concepts of saving and debt that Feed the Pig is trying to teach. I just think that these are wasted advertising dollars. A better target IMHO would be radio stations, magazines or TV networks that reach places where the people are perhaps not educated or are unaware of the concepts that Feed the Pig is educating people on.
It is almost like putting ads up for scrap booking during an NFL football game. Not the right demographic.
Cross posted at LITGM.