[PEN-L:11227] Re: on CEO Pay

["James Michael Craven" <CRAVJM@xxxxxxxxxxxxx>]

Someone wrote:

  (Why is it that non-neoclassical economists avoid the issue of
power?)
> They don't.

Response: It is just the opposite. It is the neoclassicals, usually
under the influence of some form of philosophical positivism, that
consider "power" to squishy and "non-operationalizable" a concept to
be modelled or incorporated into economic analysis. Further, they are
fond of assuming all sorts of market structures and distributions of
wealth and income as "given" thus summarily assuming away issues of
power.

I had a part-time teacher who was a hard-core Libertarian who fit the
classical definition of a fanatic: "one who won't change his/her mind
and won't change the subject." This guy told me that the  whole
concept of power was illusory, non-operationalizable and further,
"power" or "market power" is dilluted through competitive checks-and-
balances of market processes such that "power" does not play a role
in long-run market sollutions. Remember the typical neoclassical
tautology: forms of market "failure" result from the system not being
"market-like" enough and government "intervention" and  the answer
to failures of capitalism is more capitalism. I noted that as a
philosophical positivist he believed that the only real test of
theory is prediction, and since he believed that "power" was an
illusory concept, would he care to make a prediction about my ability
or inability to drive him out of the classroom--he was obviously
infecting with his dogmatism--by exercising my "illusory power" to
pre-empt him and take any of his classes at my discretion as Dept.
Chair.

The reason for attempting to discuss CEO pay within the confines of
marginal productivity theory is simply to illustrate how utterly
bankrupt, devious and polemical the whole paradigm is. Perhaps we
could even evolve a concept of "net MRP": Take change in total
revenue as a result of a marginal increment of CEO input
(including schmoozing, networking, PAC contribution authorization,
machiavellian intrigues, fixing jobs for cronies), of course
"assuming" quality and quantity of capital, land and labor constant
as otherwise how would we know that the change in total revenue was
due to the marginal increment of CEO input, MINUS the lost
productivity and total revenue due to marginal increments of CEO
policies that involve imperial arrogance, hollowing-out the
productive base, divide-and-rule, the mediocre hiring the more
mediocre, golden parachutes while thousands of workers are
being laid off etc.

I suspect that the "NET" MRPs of most of these CEOs would be negative.

                               Jim Craven

*------------------------------------------------------------------*
*  James Craven             * " For those who have fought for it,  *
*  Dept of Economics        *  freedom has a taste the protected   *
*  Clark College            *  will never know."                   *
*  1800 E. McLoughlin Blvd. *            Otto von Bismark          *
*  Vancouver, Wa. 98663     *                                      *
*  (360) 992-2283           *                                      *
*  jcraven@xxxxxxxxx        *                                      *
* MY EMPLOYER HAS NO ASSOCIATION WITH MY PRIVATE/PROTECTED OPINION *