A CONSERVATIVE CHOICE FOR THE MINORITY'S VOICE

Greed, Need, and Money


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By Dr. Walter Williams

Demagoguery about greedy rich people or greedy corporate executives being paid 100 or 200 times their workers’ salaries is a key weapon in the politics of envy. Let’s talk about greed, starting off with Merriam-Webster’s definition: “a selfish and excessive desire for more of something (as money) than is needed.”

That definition is a bit worrisome because how does one know what a person really needs? It’s something my economics students and I spend a bit of time on in the first lecture. For example, does a family really need one, two, three or four telephones? What about a dishwasher or a microwave oven? Are these excessive desires? If you say these goods are really needed, then I ask, how in the world did your great-grandmother and possibly your grandmother, not to mention most of today’s world population, make it without telephones, dishwashers and microwave ovens? “Need” is a nice emotional term, but analytically, it is vacuous.

“Selfish” is a bit more useful term, and it’s the human motivation that gets wonderful things done. For example, I think it’s wonderful that Alaskan king crab fishermen take the time and effort, often risking their lives in the cold Bering Sea, to catch king crabs that I enjoy. Do you think they make that sacrifice because they care about me? I’m betting they don’t give a hoot about me. They make it possible for me to enjoy king crab legs because they want more money for themselves. How much king crab would I, and millions of others, enjoy if it all depended on human love and kindness?What about complaints about CEOs earning so much more than the average worker? Before looking at CEOs, let’s look at another area of huge pay differences.

According to Forbes’ Celebrity 100 list, Oprah Winfrey earned $260 million. Even if her makeup person or cameraman earned $100,000, she earns thousands of times what they earn. Among the celebrities earning hundreds or thousands of times more than the people who work with them are: Steven Spielberg ($110 million), Tiger Woods ($100 million), Jay Leno ($32 million) and Dr. Phil ($30 million). According to Forbes, the top 10 celebrities and athletes earned an average of $116 million in 2004 compared to an average of $59 million earned by the top 10 corporate CEOs.When Jack Welch became General Electric’s CEO in 1981, the company was worth about $14 billion. Through hiring and firing, buying and selling decisions, Welch turned the company around and when he retired 20 years later, GE was worth nearly $500 billion. What’s a CEO worth for such an achievement? If Welch was paid a measly one-half of a percent of GE’s increase in value, his total compensation would have come to nearly $2.5 billion, instead of the few hundred million that he actually received.

If a corporate board of directors could buy a $1,000 computer that could do what a CEO does, it wouldn’t pay him millions of dollars. If an NFL owner could hire a computer to make decisions that star quarterbacks make, why would he pay some of these guys yearly compensation packages worth more than $10 million? If just anybody could have played the lead role in “The Da Vinci Code” and have it earn $758 million at the box office, why would the film’s producers have paid Tom Hanks $74 million?

There’s another important issue: If one company has an effective CEO or a team has a star quarterback, it is not the only company or team that would like to have him on the payroll. In order to keep him, he must be paid enough so that he can’t be lured elsewhere.

You say, “Williams, what about those golden parachutes for failing CEOs?” Paying a failed CEO, or a spouse in the case of marriage, enough money to go away quietly might be much cheaper than litigation.

Walter E. Williams is a professor of economics at George Mason University. To find out more about Walter E. Williams and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com.

2 responses

  1. Wow! Looks like we are thinking the same way: http://questionersden.blogspot.com/2008/01/greed-and-need.html

    I just wrote that, and then found this post. Have to admit you put it more eloquently than i, but maybe thats just a native language/foreign language thing. This has been a topic that i’ve been discussing with many people before because greed, selfishness and need are words that have never really made sense to me in the way they have been used. So it’s defnitely nice that it gets a bit of coverage on the blogosphere as well.

    January 6, 2008 at 2:29 pm

  2. Chaplain Davis

    Hey Janne,

    People are always complaining if they are not making the same kind of money as others. It’s an envy thing. I have had numerous of debate with other students when I was in college. They wanted to specialize in taking someone else money in the name of helping the poor. The real deal is that they did not want others to have anything. We all have more than we need. We just have to be content in what we have.

    January 6, 2008 at 10:49 pm

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