Monday, 23 July 2012

Corporation or government?

Just in case we thought it was only British companies that didn't like paying taxes.

I heard the news today

Briefly on the news today I thought I heard an American politician saying, in condolence, that we shall never know the answer to the question why the shootings and murders happened at the Aurora cinema. Perhaps we shall never know quite why that particular individual carried out those particular actions, but, more broadly speaking, the remark seemed to me a kind of convenient, political, sentimental evasion.

We know several reasons why, surely. Firstly, because it is possible. Guns don't kill; people do, we are told. Yet without the easy access to guns the capability would be mercifully restricted.

There will always be the urge to violence and always some people whose infirmity or perversity of mind will enable them to carry it out in some dramatic or closeted fashion. Most of us go no further than, at most, to vent our frustration in some imagined and totally imaginary threat, like the unfortunate person who was prosecuted for tweating his jocular threat to blow up Nottingham airport. Of course we do not mean it: the utterance is all. But for some it is not, and the plan is hatched in some dark corner of the mind, almost certainly without any preliminary threat.

Those on the threshold of such a state may be encouraged to lose their  inhibition by a culture, in films or video games, that seems to suggest that violence has only trivial or romantic consequences. There appears to be an acceptance that we will not discuss - how facile - why it happened at that particular screening.

In the 'real' world our innate inhibitions are weakened in a society which by regulation and force pre-empts any inclination to violence. When barriers and armed policemen prevent us from walking past 10 Downing Street, as we could when I was a child, knowing how we should behave, then, for some, fantasies are free to fill the space that once was occupied by mutual social inhibitions. Has security actually made our society any less violent or safer? Are the Norwegians wrong? Is it so impossible here?

Perhaps that was the golden age, after a war that could only have been won by the whole population (an interesting and problematic contrast, perhaps, with Norway- did our triumph have the seeds of its own decay?), that undermined the presumptions of order and privilege, before new hierarchies developed to undermine assumptions of communality. Need it have been so transient?


Could the existence of such superstars help explain extreme wage inequality? First it should be noted that Gabaix and Landier (2008) use such arguments to explain the large rises in CEO pay over the last two decades. In their model, CEOs differ in managerial talent and are matched to firms competitively. If the marginal impact of a CEO’s talent increases with the value of the firm under his control, then the best CEO manages the best firm. Furthermore, even very small differences in talent can produce large differences in remuneration. For example, they calibrate the model and find that the value of a firm increases by only 0.016% if they replace the 250th best CEO with the best CEO. Yet these small differences in talent translate into large pay differences as they are magnified by firm size. The same calibration shows that the number 1 CEO is paid over 500% more than the 250th CEO.