{"id":151555,"date":"2010-01-07T16:13:49","date_gmt":"2010-01-07T21:13:49","guid":{"rendered":"tag:business.theatlantic.com,2010:\/\/3.33152"},"modified":"2010-01-07T16:35:28","modified_gmt":"2010-01-07T21:35:28","slug":"bankers-are-kind-of-like-athletes-so-what","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/151555","title":{"rendered":"Bankers Are Kind of Like Athletes. So What?"},"content":{"rendered":"

Bankers like to compare their high salaries to professional athletes. This is because many of the people who’d like to make effigies of millionaire bankers also own jerseys of their favorite, even richer athletes. Watch out, cognitive dissonance! Don’t you people understand<\/i>, Goldman Sachs tells us, we’re just like baseball players. If you don’t pay us, we’ll leave. <\/i>James Kwak tries to debunk this line of argument.<\/a><\/p>\n

He concludes<\/a> that<\/p>\n

yes, bankers are like athletes. Their individual contributions are
\noverrated relative to their supporting environments; they are overpaid;
\nthey are paid based on where they randomly fall in the probability
\ndistribution in a given year; and paying a lot for bankers is no
\nguarantee that your bank will be successful in the future. Team sports,
\nlike banking, are an industry where the employees capture a large
\nproportion of the revenues. And one with negative externalities, like
\nupsurges in domestic violence around major sporting events. Neither one
\nshould be a model for our economy.\n<\/p><\/blockquote>\n

I somehow agree with everything Kwak says, and am also weirdly
\nunconvinced by his argument. Bankers and athletes are paid a lot, and
\npossibly too much. But, so what? If Kwak is trying to suggest that pay
\ndoesn’t dramatically effect
\nperformance in the aggregate, he picked the wrong sport with baseball.
\nIn 2008, five of the eight teams that made the playoffs were among the
\ntop 10 in highest payroll. Two more in the top five — the Yankees and
\nMets — both barely missed because of an untypically dismal start and
\nfinish to the season, respectively. The Yankees make the playoffs just
\nabout every year. So do the Red Sox and the Angels. Those are three of
\nthe top six payrolls.<\/p>\n

Kwak doesn’t refute the main point by the Goldman director: If you
\ndon’t pay Goldman Sachs employees what they think they’re worth (or
\nwhat they can get from another bank), they will leave. That’s just an
\nindisputable fact. <\/p>\n

Now we can have a debate about whether we
\nwant
\nour current bankers to be incented to go into other jobs by limiting
\ntheir total<\/i> compensation pool, which will cut their salary and send
\nmore of them looking for jobs in other industries<\/a>.
\nThe let’s-make-banking-boring-again crowd might like this idea. Volker
\nmight like this idea. Kwak might like this idea. I might like this idea.<\/span>
\nYou could do this with an industry-specific tax, which would seem kind
\nof draconian. Or you could try to shrink the compensation pool with
\ncapital requirements and leverage ratios. But I guess I don’t understand the value of comparing and contrasting athlete and banker salaries and incentives.<\/p>\n



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Bankers like to compare their high salaries to professional athletes. This is because many of the people who’d like to make effigies of millionaire bankers also own jerseys of their favorite, even richer athletes. Watch out, cognitive dissonance! Don’t you people understand, Goldman Sachs tells us, we’re just like baseball players. If you don’t pay […]<\/p>\n","protected":false},"author":1534,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-151555","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/151555","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/1534"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=151555"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/151555\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=151555"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=151555"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=151555"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}