Everybody in Cambridge, Massachusetts can’t stop talking about Jeremy Lin, writes Ken Rogoff. The Nobel Prize winning economist is a professor at Harvard, where Lin got his economics degree.Rogoff is a fan of Lin. But he uses the “Linsanity” as a launchpad to talk about the ongoing debate about huge paydays.
Here’s an excerpt from Rogoff’s latest piece in Project Syndicate:
What amazes me is the public’s blasé acceptance of the salaries of sports stars, compared to its low regard for superstars in business and finance. Half of all NBA players’ annual salaries exceed $2 million, more than five times the threshold for the top 1% of household incomes in the United States. Because long-time superstars like Kobe Bryant earn upwards of $25 million a year, the average annual NBA salary is more than $5 million. Indeed, Lin’s salary, at $800,000, is the NBA’s “minimum wage” for a second-season player. Presumably, Lin will soon be earning much more, and fans will applaud.
Yet many of these same fans would almost surely argue that CEOs of Fortune 500 companies, whose median compensation is around $10 million, are ridiculously overpaid. If a star basketball player reacts a split-second faster than his competitors, no one has a problem with his earning more for every game than five factory workers do in a year. But if, say, a financial trader or a corporate executive is paid a fortune for being a shade faster than competitors, the public suspects that he or she is undeserving or, worse, a thief.
Rogoff makes a good point that’s tough to argue.