exists(max(performance(pay)))
US Congresspeople don’t make a lot of money in salary—most make $174,000/yr. They could easily make several times that much as consultants. They do, however, have insider information giving them very large returns on the stock market. For that, or other reasons, many of our representatives care more about keeping their jobs than about not wrecking the economy.
Most discussion of incentivizing assumes that higher pay leads to higher performance. The logic is that higher pay leads to wanting more to keep the job, which leads to higher performance. But the second link in this chain is weak. Sometimes higher motivation to keep the job leads to lower performance. CEOs are motivated to hide losses with accounting tricks, military officers are motivated to deny and cover up abuse by their subordinates, teachers are motivated to inflate their students’ test scores.
They could? I was rather under the impression that the consulting was only because of the Congressional job, and were conditional on the job. Unless you meant, ‘long-time incumbents don’t make much salary, although they have stockpiled a great deal of quid-pro-quo and could make use of the revolving door, and could quit at any time’, which seems like a much less strong incentive...
This isn’t right at all, at least not with any of the compensation consultants or managers I’ve worked with. (I have worked with a great many.) I guess it is possible that you mean amateur discussion of incentives, but that seems wrong, too. You didn’t cite any evidence for this surprising claim, so I’m inclined to assume that this is all just based on a false premise.
High salaries are used to attract people with high expected performance, not to motivate them after hiring. Instead, employers use the prospect of future raises to motivate present performance. These raises are determined based on objective performance metrics when possible, or customer satisfaction surveys or manager (and increasingly, subordinate) job performance evaluations.
With the cases of government employees or teachers, for whom market based compensation decisions aren’t useful, arguments for higher salaries are usually based on attracting talented people into teaching, not to motivate higher performance for present teachers (a stupid idea).
This assumption is standard in the minimum wage debates. The idea is that if workers are paid $7 an hour they are more likely to want to keep the job than if they get paid $3 an hour. And if they want to keep the job, they will work harder.
I suspect this argument breaks down when one gets to higher paying jobs that have many markets.
It also breaks down when working harder doesn’t contribute much to keeping the job, as may be the case for congresspeople.
I can’t make sense of this argument at all. In all of the cases you’ve mentioned, the problem is the direction of the incentives, not their strength.
“incentive” in the title means “salary”. Or did. I just changed the title.
I take it you just felt like ranting.
No. What did you base that inference on?
So you give me a firm denial, and then you edit out the first sentence which made it clear you were referencing contemporary politics, and clean up other sloppiness. I’ll just move on.
So, the idea is that you don’t want them to have enough incentive for them to risk be willing to be caught committing crimes?
I think this is because most discussions of incentivizing don″t take into account Goodhart’s law.
This is another factor, which is not an instance of Goodhart’s law.
Actually, one critical glance at the data shows that, while the DJ rose from about 3500 to about 9000 between 1993 and 1998, so the US senators managed to beat the market by about 2% annually, which is good, but not fantastic, so your premise is not easily supported by evidence.
I don’t think you’re reading the paper correctly.