A much clearer discussion of income distribution and inequality could be had if we simply stuck to considerations of human wellbeing and useful incentives. The rest is meritocratic ideology; and, as the reception of Thomas Piketty’s book suggests, that ideology may now have run its course.
BERKELEY – The best review of Thomas Piketty’s Capital in the Twenty-First Century that I have read so far is the one published by my friend and frequent co-author Lawrence Summers in Michael Tomasky’s Democracy Journal. Go read the whole thing now.
Still here? You are, you say, unwilling to read 5,000 words? It would be time well spent, I assure you. But if you are still here, I will offer you neither a synopsis nor highlights, but rather a brief expansion of a very small and minor sidelight, an aside in Summers’s review about moral philosophy.
“There is plenty to criticize in existing corporate-governance arrangements,” Summers writes. “I think, however, that those like Piketty who dismiss the idea that productivity has anything to do with compensation should be given a little pause.” Why? “The executives who make the most money are not...running public companies” and “pack[ing] their boards with friends,” says Summers. Instead, they are “chosen by private equity firms to run the companies they control. This is not in any way to ethically justify inordinate compensation – only to raise a question about the economic forces that generate it.”