Do you really think that you can evaluate someone’s productivity simply by looking at their salary?
For instance, imagine an exceptionally intelligent and hard-working individual who leaves a high-paying job in finance or tech to work on a startup. Have they suddenly become unproductive because they have switched to a role that pays less (in the short term)?
Conversely, imagine a similar individual who is working at a startup for 16 hours every day, but grows burnt out and leaves to take a job at a normal tech company, where he works for only 8 hours a day but makes a much higher salary. Can this person really be said to have become more productive?
By economic definition, he’s more productive in the latter position… unless you are smuggling in unstated axioms about positive externalities about the former position overwhelming the revealed preference of the economy for his work in the latter position, which I rather hope you aren’t, since that would be begging the question.
I’m not talking about positive externalities, I’m talking about actual work being done. Some structures—early-stage startup companies generally included—tend to involve disproportionately large amounts of work relative to others, which is made up for by the potential for very high, if delayed, payoffs.
The “revealed preference of the economy” is difficult to actually determine in such cases given the uncertainties involved, though it could likely be estimated using reference class forecasting and similar predictive techniques.
For instance, imagine an exceptionally intelligent and hard-working individual who leaves a high-paying job in finance or tech to work on a startup. Have they suddenly become unproductive because they have switched to a role that pays less (in the short term)?
This is a very uncharitable interpretation of what I said. Their productivity in the startup has to be based on an expected value calculation. If the startup accomplishes nothing and goes under, then I think it is fair to say that all their hard work was unproductive and they would have been more productive selling their labor to someone who knew how to do something useful with it. If their startup makes $Billions then all the work they did to bring it to fruition was very productive. Ahead of time you have to guess at the distribution of possible outcomes and base expected productivity on that.
I said that if lukeprog’s current activities somehow yield big dividends in the future then I will have been wrong about his current productivity. I just don’t think that is very likely.
Ah, we seem to be using different definitions of productive. I was using “productive” in the sense of “effective at performing tasks,” while you seem to be using it in the sense of “producing economic value—” my mistake. I think I was confused by your statement
I have no reason to think that his output is higher than anyone else who makes the same amount of $ that he does, so I don’t think he is especially productive.
which seems to conflate “output” with productivity.
Do you think you can evaluate the productivity of a group of people by looking at their combined $ output? There is this measure called GDP that does that and it is pretty popular.
I think that $ output should be the starting point of evaluating productivity and adjustments from that point should require some justification. Salary is not the same as $ output but it should be roughly proportional. People can’t really be paid 100% of their output, so maybe on average salary is like 50% of $ output, and for some people it is only 25% and for some people it is 75%. That already creates a lot of potential error, but again there needs to be some reason to believe that a person is overpaid or underpaid relative to their $ output.
Do you think you can evaluate the productivity of a group of people by looking at their combined $ output? There is this measure called GDP that does that and it is pretty popular.
But also extremely bad as a measure of wealth generation. The economists who came up with the concept in the first place basically said “by no means should this be used as a measure of wealth generation,” but then we went and did it anyway for lack of an obviously better measure.
As for the relation of salary to productivity, an incompetent CEO who runs their company into the ground (and thus has a negative wealth output) can make orders of magnitude more money than, say, a highly productive academic. Salary is not a good proxy either for the usefulness of the work one produces or the amount of time and effort one spends being productive (the hardest and longest working people in the country are often among the worst paid.)
I would characterize GDP as “obviously wrong” as a measure of actual productivity.
That being said, one good reason to assume that someone is underpaid relative to their output is that they work in the nonprofit sector, where salaries are typically lower for equivalent levels of work.
Do you really think that you can evaluate someone’s productivity simply by looking at their salary?
For instance, imagine an exceptionally intelligent and hard-working individual who leaves a high-paying job in finance or tech to work on a startup. Have they suddenly become unproductive because they have switched to a role that pays less (in the short term)?
Conversely, imagine a similar individual who is working at a startup for 16 hours every day, but grows burnt out and leaves to take a job at a normal tech company, where he works for only 8 hours a day but makes a much higher salary. Can this person really be said to have become more productive?
By economic definition, he’s more productive in the latter position… unless you are smuggling in unstated axioms about positive externalities about the former position overwhelming the revealed preference of the economy for his work in the latter position, which I rather hope you aren’t, since that would be begging the question.
I’m not talking about positive externalities, I’m talking about actual work being done. Some structures—early-stage startup companies generally included—tend to involve disproportionately large amounts of work relative to others, which is made up for by the potential for very high, if delayed, payoffs.
The “revealed preference of the economy” is difficult to actually determine in such cases given the uncertainties involved, though it could likely be estimated using reference class forecasting and similar predictive techniques.
This is a very uncharitable interpretation of what I said. Their productivity in the startup has to be based on an expected value calculation. If the startup accomplishes nothing and goes under, then I think it is fair to say that all their hard work was unproductive and they would have been more productive selling their labor to someone who knew how to do something useful with it. If their startup makes $Billions then all the work they did to bring it to fruition was very productive. Ahead of time you have to guess at the distribution of possible outcomes and base expected productivity on that.
I said that if lukeprog’s current activities somehow yield big dividends in the future then I will have been wrong about his current productivity. I just don’t think that is very likely.
Ah, we seem to be using different definitions of productive. I was using “productive” in the sense of “effective at performing tasks,” while you seem to be using it in the sense of “producing economic value—” my mistake. I think I was confused by your statement
which seems to conflate “output” with productivity.
Do you think you can evaluate the productivity of a group of people by looking at their combined $ output? There is this measure called GDP that does that and it is pretty popular.
I think that $ output should be the starting point of evaluating productivity and adjustments from that point should require some justification. Salary is not the same as $ output but it should be roughly proportional. People can’t really be paid 100% of their output, so maybe on average salary is like 50% of $ output, and for some people it is only 25% and for some people it is 75%. That already creates a lot of potential error, but again there needs to be some reason to believe that a person is overpaid or underpaid relative to their $ output.
But also extremely bad as a measure of wealth generation. The economists who came up with the concept in the first place basically said “by no means should this be used as a measure of wealth generation,” but then we went and did it anyway for lack of an obviously better measure.
As for the relation of salary to productivity, an incompetent CEO who runs their company into the ground (and thus has a negative wealth output) can make orders of magnitude more money than, say, a highly productive academic. Salary is not a good proxy either for the usefulness of the work one produces or the amount of time and effort one spends being productive (the hardest and longest working people in the country are often among the worst paid.)
I would characterize GDP as “obviously wrong” as a measure of actual productivity.
That being said, one good reason to assume that someone is underpaid relative to their output is that they work in the nonprofit sector, where salaries are typically lower for equivalent levels of work.