Income disparity and Laissez Faire Capitalism

First of all, income disparity is not in itself a problem for society to deal with unless it involves some other forms of crime and violations of rights. Individuals can and typically should try to make as much money as they can without doing things that will reasonably result in loss of their enjoyment of life (like crimes and violating the rights of others.).

But it is reasonable to wonder as a share holder or owner of a company how one person’s time could possibly be worth 1,000 dollars per hour while most other capable people’s time is worth 20 dollars per hour. How can that one person, for instance, outperform a chief executive team of 25 engineers making 40 dollars per hour, or 50 skilled laborers making 20 dollars per hour? Maybe that one person can, but it won’t be by some extraordinary labor, skill, or reasoning ability. Instead, the reason for that outperformance will lie in some possession of that individual such as some key knowledge, or relationship, or some piece of property. As such, it would be reasonable for a group of shareholders or a private owner that no longer wishes to run the company to explore the replacement of CEO’s with CET’s in cases where a single CEO cannot outperform a CET, and it would be reasonable for a company to seek to purchase whatever asset the perspective single CEO has that would permit them to outperform a CET, rather than try to obtain its use indirectly by hiring the CEO at extreme price. One might think that this approach will inevitably result in unreasonably high salaries for members of a CET, but CET’s, unlike CEO’s, have time to train new members in house and under contract, which allows for continuity of talent for the company while preventing exploding costs to the owner/shareholders.

Leave a Reply