Friday, January 24, 2014

Income inequality from a free market perspective

Income inequality is bad from a free market perspective. However, this is generally not examined. From a free market perspective labor is just another commodity. Normalized for job difficulty and rarity of skills, all incomes over the long haul should roughly equalize as incentives draw more into fields in shortage and drive others out of fields with surplus.

So why do mediocre CEOs who create results that are just as mediocre get paid so well and why do these pay disparity results persist? Why do we not see the creation of CEO bootcamps to flood the market for CEOs and drive down compensation? Why don't we have significant international arbitrage, pulling CEOs from other countries until pay differences internationally simply disappear?

Something's not quite right there. It appears to be a market failure and if you're a betting man, it's a pretty safe bet that there's a government intervention that prevents this market from functioning normally. But the generally free market commentariat doesn't seem to be hunting too hard to find it.

I don't yet have a solution for this but CEO bootcamp would seem to be a great startup business to offer CEOs to boards who are currently overpaying for their CEO talent. The truth of the matter would emerge over time as you execute. And CEObootcamp has both .com and .net occupied, though funny enough .org is just parked. Neither of the two are pursuing this angle of the business. They're both about improving the skills of existing market participants, not increasing the supply in an organized way.

So, social justice lefties, here's a roadmap to a sweet way to make some cash and reduce the pay disparity that you're always talking about. It's a free business idea that sustainably solves the problem of pay disparity and you don't have to get in bed with slimy politicians to do it.

Any takers?