Friday, 23 December 2011

Ultra high incomes: agency/principal neglect

Martin Wolf wrote an interesting piece in the FT on the growing gap between those with median incomes in both the US and UK and the super wealthy. One of the most perceptive remarks he makes is as follows:


People will disagree over why rising inequality matters and what should be done about it. I suggest it matters most, at least in the high-income countries because it both undermines hopes for any reasonable degree of equality of opportunity and cements the inequalities in power that have, in turn, allowed the preservation of a wide range of privileges, particularly in taxation.

These outcomes should matter even to those who have no concern for equality of outcome. I would add that some – perhaps a great deal – of the ultra-high incomes at the top are almost certainly the fruit of rent extraction facilitated by a breakdown in the control exercised by principals – outside investors – over their agents – corporate executives and financiers. Huge rewards then are both unjust and inefficient.

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