Stephen Monrad

I am beginning to think that what exactly people are being paid for when they work has broad implications for how an economy works. As I have posted earlier here and here, I’m interested in whether it is better to pay for effort or results. The decision to base pay on one or the other will definitely have an impact on the distribution of wealth. It will also likely have an impact on overall economic productivity. Finally, I believe the choice affects what type of economic system should be used.

Paying based on effort will result in a much flatter distribution of wealth because how hard people work can’t vary all that much. It’s hard to imagine how one person could work 10 times as hard as another. There are only so many hours in the day.

The effect on overall productivity is uncertain. Paying for effort instead of results creates a risk that people might do useless work. I’m not sure how big a problem this would be. Special care would need to be taken to ensure that people worked effectively on problems that actually need to be addressed.

I believe market based economies are much better suited to paying people based on results than based on effort. If a person is free to work for whomever they want at whatever wage they can strike a deal at, more productive people will inevitably end up with higher wages. I think it would be very difficult to find a sensible way to pay people based on effort in a predominantly market based system.

Perhaps one of the reasons I am so determined to dream up a radical new economic system is because I want a system where people are paid based on effort. To me, this seems like a fairer way to distribute wealth. Market based economies simply aren’t well suited to paying people based on effort.