What’s fair?

In the comments of this post, Wally posted a video about how actual wealth distribution differs from what a group of people feel like is the ‘ideal’ wealth distribution.

I think the video provides a good example of the dangers of convoluted reasoning disguised as something that sounds intelligent.

For instance, in one part of the video, the narrator says that CEOs make as much in one hour as their average employees make in a month and suggests that is unfair.

When framed this way, the unfairness seems plausible. However, this framing is like a distraction used in a parlor trick, or a red herring.

He implies that a CEO should make some multiple of the wages of an average worker, but he doesn’t tell you why. He figures you get it. But, do you?

Most of the average workers who have young children make several orders of magnitude more than those children.Is that fair? People with kids may now realize the distraction.

It’s not a question of fairness. They understand that there isn’t necessarily a relation between what they make and what their children make. They understand that what they make is based on the value they create for their employers or client and what others are willing to do that for, as well.

Now, don’t get me wrong. I think most CEOs are overpaid. But, I don’t base that opinion on nonlogic like what I think a fair multiple is between some unrelated job and their job, no more than I think what a nurse is paid should be some multiple of what a painter makes, or what a professional baseball makes should be some multiple of what the beer vendor in the stands makes. That’s nonsense.

I think most CEOs are overpaid in part because their decisions do not increase the value of their company enough to cover the risks they take and because Boards of Directors aren’t interested enough to get find truly good business leaders.

The whole video is a red herring. It basically compares ‘an ideal’ wealth distribution to the actual wealth distribution and implies that something is unfair. But, it takes more than a red herring to convince this guy.

Try to use some logic. Let’s talk about the value the people at the low, middle and high ends of the distribution create. Let’s talk about their financial behavior, their investments in human capital, decisions they’ve made.

Let’s talk about the absolute wealth at each end. Should I care than Bill Gates doesn’t fit on his chart, if I’m living a life unimaginable by my even fairly recent ancestors?

Update: ‘Dude Where’s My Freedom”s comment reminded me of the lyrics from Tenacious D’s song, City Hall. After starting riots to overthrow government and now ruling, Jack Black and KG are issuing their decrees. Their third decree is,

No more rich people and poor people. From now on, we’ll all be the same…ummm…I don’t…I gotta think about that.

Funny and true.