Monday, December 14, 2009

Oh Boy, Financial Crisis Sure Brings Out the Commies

The New Economics Foundation, a left-leaning think-tank, says that hospital cleaners and many other low-paid workers contribute far more to society than investment bankers and this should be reflected in their pay, writes FT's Chris Giles.

In their report “A Bit Rich” they argue that the government should step in if people’s value to society is remarkably different from their private value to an employer.

The report says good hospital cleaners prevent the spread of infection, saving lives and protecting the wider health of the public. The authors calculate they provide 10 times the benefits for which they are directly paid.

Eilis Lawlor, head of the valuing-what-matters team at the New Economics Foundation, said: “Pay levels often don’t reflect the true value that is being created. As a society, we need a pay structure which rewards those jobs that create most societal benefit, rather than those that generate profits at the expense of society and the environment”.

Their report also argues that nursery workers provide much greater social value than their pay because they enable other people to stay in paid employment.

It really appears as though you could spend a semester just dissecting the economic errors in this report. Off the top of my head, I see a problem in not understanding supply and demand as fundamental to determining prices, a failure to understand prices as signals, a failure to understand consumer surplus, a failure to understand the subjectivity of value and probably a failure to understand the great value of investment bankers as investment bankers versus government leeches masquerading to be investment bankers.


  1. Wenzel,

    How socialists calculate: with "true value"

  2. ho ho ho,
    ....."subjectivity of value"......
    now there's topic that one could spend a lifetime seeking to comprehend.
    some say "value" is a hidden constant in plain sight .... and the folly of men is to wander blindly from edge to edge seeking its harmony ..... or is that by definition .... a "market"?

  3. Wenzel - I agree with the economic errors you identified but it seems almost beside the point when an "expert" on economics like Kruger can make the following critique regarding statements that emphasize the political causes of the financial crisis (CRA, Fannie Mae, Freddie Mac and the FED isn't even mentioned):

    "In part, the prevalence of this narrative reflects the principle enunciated by Upton Sinclair: “It is difficult to get a man to understand something when his salary depends on his not understanding it.” As Democrats have pointed out, three days before the House vote on banking reform Republican leaders met with more than 100 financial-industry lobbyists to coordinate strategies. But it also reflects the extent to which the modern Republican Party is committed to a bankrupt ideology, one that won’t let it face up to the reality of what happened to the U.S. economy."

    This suggests Kruger actually believes that bankers and Republicans are influenced/biased by the sources of their paychecks but government employees and Democrats are not. This increibly biased critique by an accepted expert in the field of economics makes even the silly statements of the NEF seem legitimate. It all becomes just a metter of personal opinion.

  4. Marginal utility...Whining about why bankers are paid more than nurses neglects the law of marginal utility.