Wage inequality

A novelist, academic and CEO might have very similar intellect and skill levels, but their income could differ by factors of thousands - and, as Will points out, academics' working conditions are deteriorating. Why the difference?

The conventional neoclassical answer is that wages equal marginal product, and that CEOs have a higher marginal product than others. This is a just-so story which glosses over a lot.

For one thing, what matters is that one's product be monetizable and appropriable. The great writer or musician creates an enormous amount of consumer surplus, but she cannot capture this for herself. Quite the opposite; as Gillian Welch sang*, she is under pressure to give away her work. Similarly, if you believe human capital theory, academics - at least the better ones - create billions of pounds of value. But they don't see much of it. By contrast, the CEO's output is more monetizable.

On marginal product and incomes. Five reasons are offered for why the CEO makes so much more, it's worth a read.

I link to this post because a lot of folks in tech have the same misconception about the money-making potential of their app or business as people have about wages, that they simply equal marginal productivity. If only life were so simple.