It's a commonplace of current discourse that bankers of course don't deserve the vast wages that they get. Half the world seems to think that you could put one of the few numerates the State school system produces into an office in London and everything would be just the same. Thus these million pounds salaries and bonuses are not a reflection of some rare skill set. They're just greed....although quite how that works I'm not sure. I regard myself as at least as greedy as the next economics graduate but no one's ever offered me a million a year so there must be something more than merely the desire for huge wedges of wonga going on here.
Which perhaps there is: if we thought that wages might be a function of the possession of a rare skill set then we could go looking for evidence. Do people, in an environment where we can disaggregate causes and effects, with an additional extra skill get more money? It would appear that they do:
The study of sports is beginning to tell us more and more about the operation of labour markets and incentives. This column looks at football to verify that wages reflect marginal productivity. It shows that two-footedness – the rare ability to use both feet to pass, tackle, and shoot – commands a large wage premium.
There are a lot of similarities between the market for footballers and that for bankers. Both are international markets, the players in them highly mobile. Both are "tournament" markets, in which many try to get in but it's the few winners at the very top who get disproportionate rewards. It's even true that a banker doesn't actually need to be all that good by any absolute standard, just like a footballer. They just have to be better than those around them.
And if we find that in the market for footballers extra skill leads to extra pay, might we not, at least as our starting assumption, work on the thought that extra pay might reflect extra skill in the market for bankers?