A solid analysis of why pay in the securities industry rose 97% from 1992 to 2007, greater than any other industry; essentially, regulation decreased so there were more opportunities for clever people to do financial manipulation, the labor pool is limited because Wall Street firms tend to hire people from exclusive colleges (a trend with which we are all familiar), and firms can beat out regulators by hiring regulatory professionals for more money than the government can afford to pay them. This makes the issue of salaries complex, since attempts to regulate pay on Wall Street will have to be mixed with broader regulations on the stock exchanges to see any real benefit.
The main thing to take away here, though, is that financial industry employees make more money than the free market should let them earn. That alone is a solid reason to back regulation--the usual counterarguments about "free enterprise" fall flat when it is clear that restricting businesses in this area would better approximate a free market outcome.
Thursday, March 26, 2009
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1 comment:
How much should the free market let people earn?
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