What is it that drives compensation? Is Robert Downey Jr. really so exquisitely talented that he provides $50 million of entertainment value in a single movie? Does a CEO who bankrupts his company really earn hundreds of millions of dollars to do so? These are the sorts of questions people ought to ask when arguing the value of compensation and whether the market actually determines said value. Here's a guy who's asking the questions, and the answers come down to thewre not being a free market for labor services in which earnings are based upon intrinsic value of work. http://www.cepr.net/index.php/blogs...ust-talent-and-hard-work#.UwEwll28fEM.twitter I really can't wait to see somebody argue that Robert Downey Jr. creates $50 million of value.
I have been thinking about a similar sort of thing, not spurred by jealously about someone else's outrageously excessive income but my own situation: I have a paid job and I have a volunteer position, both which get about equal amounts of my effort. The volunteer position involves teaching people - mainly teenagers - about the basics of flying an airplane; it requires not only a huge amount of expensive training and FAA certification but various other training and tests and certifications that must be kept up-to-date yearly. My paying job requires a good deal of logical reasoning, memory, analysis, and communication but really only requires a college degree so that the employer's HR can more easily sift through applicants. The training is considerably less involved and the consequences of me making a mistake are usually far less dire than with the volunteer position. Both positions are probably about equally important to society as a whole, but one pays and the other costs me; in a perfectly rational world why should I bother to volunteer? Because money isn't everything.
Celebrities are different. They are a monopoly of one being sold to a market of millions. For example, I'm sure there are thousands if not hundreds of thousands girls who can sing better than Miley Cyrus. But no one knows them so people are willing to pay millions for Miley Cyrus to "sing" and look nearly nude in a video As for CEOs. Sometimes the best CEOs will have companies go out of business for various reasons. And some are prized for their abilities to wring the absolute most out of a company that is going to fail anyway.
I'll give it a shot. Downey Jr. made $50 million for Iron Man 3, which grossed $1.2 billion world wide. He only made $500k for Iron Man 1 which grossed over $500 million world wide. Had they replaced Downey Jr. with another actor in Iron Man 3, do you think it grosses $1.2 billion?
You can stop reading right there. Anything based on that is based on a fallacy. What's the "intrinsic" value of work? Does God print a schedule of fees for services that I'm unaware of? No. When someone says "intrinsic," what they're really saying is "the value I would assign to it if I were in charge." The value of work is what someone will pay for it. Is RDJ worth $50 million a picture? Paramount Pictures clearly thinks so. Guess what? That means HE IS. So is every star athlete or CEO or singer or talk show host that's getting a big paycheck. The person writing the checks believes they are worth it. Who are YOU to say otherwise? Your money isn't at stake.
I'm in the "in a fair world movie stars and sports stars wouldn't make more money than police, firemen and teachers" camp. Alas.
Forbin, I'm somewhere between you and Paladin on this. Generally I think the market does just fine at assigning value. But the outliers are not an example of just fine.
But the movie star is offering his services (entertaining) to a potential pool of millions of people. No matter how good the fireman or teacher is, the pool of people needing that particular fireman's/teachers services is small - only everyone in that community/state/tax payer pool.
I would like to point out Forbin that overall police, firemen, and teachers spend a substantial amount of time not doing much actual work. And I speak as a person who has been a teacher for 10 years (and whose immediate family has more than 60 years of service as a teacher) and knows numerous individuals in the other two occupations. Firemen spend a whole lot of time in mere busywork waiting for emergency calls (most of which do not involve much effort or danger on their part). A substantial number of police officers work in areas where there is very rarely any kind of major crime that requires much effort.
If Robert Downey Junior being in a movie will cause more people to buy a ticket than another actor who would, then I'd say he's probably worth paying more money, even if it's (arguably) for the same amount of work. It's like the Ducks Unlimited logo. What is a logo worth? A logo is just pixels on a screen or threads on a shirt...but companies pay DU a butt ton of money to put that logo on their merchandise, because they know more people will not only want to buy that merchandise, but be willing to pay more for it because the logo is on it. So what's a logo worth?
This is a coherent view. If it is accurate, then clearly, earnings can never be a function of talent, effort, or discipline. In such a world, there is no reason to be proud of earning anything, much less of earning lots; nor any shame in earning nothing. Is this what you believe?
Careful, Packard. If you're heading toward encouraging people to define their self-worth based on their paycheck, you're on dangerous ground.
This. And no one knows who the other talents are by design. If the music industry created a dozen Mileys, that would divide the revenue among too many sources. It's the same across all the arts.
Why? WF was founded on the Storm Rucker School of He Who Has the Most Toys. Jeriko was its principal proponent. I've never seen it promoted quite as blatantly anywhere else online.
So the music industry conspires to artificially constrain the supply of talent. That is precisely the point of the OP. Miley is only worth what she makes because the others who profit by this have the ability to manipulate the market.
That would be a third position. It's not mine and I don't think it's Paladin's, although he might be a bit closer to it than I am.
Clearly the movie studios that pay Robert Downey Jr. $50 million for a movie feel that his presence can bring in additional revenue at least equal to the difference between his pay and a lesser-known actor's, or they wouldn't do it. If anything, actors' and athletes' salaries are probably MORE grounded in reality than those of the CEOs who create a nepotistic web of back-scratching by serving on each other's boards.
I'm reminded of Will Smith a few years ago. Studios has labeled him the "30 million dollar man" Because simply having his name above the title in a move as in "Will Smith in X-Men II" would guarantee that a movie made a minimum of 30 million dollars its opening weekend. Now imagine if instead it was "Some Random Middle Aged Black Guy in X-Men II". Think it would make nearly as much?
Your conclusion doesn't follow from my premise. You say that "earnings can NEVER be a function of talent, effort, or discipline." That's--generally speaking--not so. Very few high paying jobs are available to those without talent, effort, or discipline. These are NECESSARY for most high income jobs, but not SUFFICIENT. High earnings come from high demand from society for the work and scarcity of available labor for that work. You may have a TALENT for, say, water color painting. Unless you're REALLY good, that won't get you a high income job because there are many other people with the same talent and the social demand for that service is relatively low. You can make a lot of EFFORT, say, digging ditches. But so can many other people, and, again, the social demand is quite low. You can be very DISCIPLINED, say, making sure each cupcake at the bakery is frosted consistently. But that consistency is probably not something anyone's going to pay much for. However, if you have talent, expend effort, and are disciplined at, say, writing software or navigating intellectual property law or performing angioplasties, you can probably make a high income. If you have the right kind of charisma and know how to act, you might become a big movie star. If you have the ability to play basketball well, you might become a professional basketball player. If you're able to demonstrate the ability to manage a corporation, you might become a Fortune 500 CEO. I wouldn't say there's shame in doing any job unless you know you're capable of more and aren't seeking a way to do so. And you may not necessarily be proud of your high-paying job--certainly, there are people who hate the ones they have--but if you're getting a big paycheck, you can be relatively certain you're providing a service that's of value to society.
And again we're back to the myth of corporate machines not having anything at all to do with a free market...
Do you believe that her fans would pay to see just anyone do what she does? That a different singer/dancer/actress--maybe even a better one!--could be substituted without anyone noticing or caring?
Did you miss the part about "prescreening"? You're told before the fact that Miley is All That. You never get to see the dozens or possibly hundreds of other performers who are just as...talented.
You mean the part where she was "prescreened" by being in the business for 10 years building an enormous fan following? She didn't just pop into existence a year ago. Indeed, there were LOTS of girls Miley's age on television shows in the 2000s, but SHE was the one who built a fanbase. If it was just a matter of being pushed by a corporate machine on a public helpless to resist, we should be talking about Hillary Duff or Amanda Bynes, other similarly-situated girl stars who--despite plentiful opportunities--never made it to Miley's level. Perhaps you do in that case. But I expect you acknowledge that most people who are very successful in the arts have something that is not so easily replicated. If it was, every rip-off would be as successful as what it was imitating.
I'm saying it can't be a function, i.e. a general correlation. That sometimes a person with talent and effort can earn well, and might not have earned as well without the same effort, doesn't make earnings a function of talent and effort. Why would they be necessary for a high income job, in a world where value is defined purely tautologically? Which still leaves us with Cyrus versus the ICU nurse. You're saying their earnings reflect the relative value of their work for socitey, right?
