We had a discussion back on my May 29th post “Should fairness be measured in terms of effort or results?” about effort versus results. An example of napkin folding was used where on folder could fold twice as fast as the others. The question in that post was how to divide up the work. I don’t think we came to any conclusion about what is fair.

The pay question is equivalent to the dividing the napkin folding task. Should the quick folder be paid more per hour to fold napkins? If it’s output that counts, yes. If it’s effort, no.

I don’t agree with your assumption that paying for effort must have hidden obsticles because otherwise someone would set up a company that pays based on effort. The beliefs and rules that govern the marketplace have a big effect. For example, if people are free to negotiate salaries and jump from job to job, the high performers will all go to companies that pay based on performance. The pay for effort folks get left with unproductive people. If we want to pay based on effort, we all have to pay based on effort.

In a flexible, competitive market, individual companies are free to try different strategies. If more equal pay resulted in a better product or better overall revenue/profitability, companies have the opportunity to do so now. The flip side would be that if paying CEOs or star athletes millions of dollars was a detriment to a company, their competitors could out-perform them by paying more reasonable salaries.

If no one is willing to establish a company with “fair” salaries and have to be forced into it through regulation, I would think that there must be inefficiency introduced.

I’m sure that there are situations in which this is not true, but, again, my starting point would be to allow freedom. I think the burden of proof is on the argument to put controls on the system.

Eric

I think the starting point has to be that we pay people for results. The reason is that at some point along the line there have to be results in order for there to be value to distribute. If you are a subsidence farmer, a “good effort” does not feed you.

However, as economies become more sophisticated and specialized, maybe there is room for paying for effort in some cases. The yardstick I would measure it by is whether it increases overall value by some measure, although I don’t know how to measure it.

Let’s say the NBA distributes some of its revenue to support developmental players as Stephen suggests. Would this result in a better basketball product? Would the NBA or the NBA team owners increase their revenue?

I don’t think I would implement these kinds of changes for fairness’ sake if it didn’t add value.

Eric