How to Fund All Your Favorite Causes--and Get Rich in the Process
By Art Carden
I’ve read a few of the comments on my Forbes.com article about minimum wages, and there seems to be a lot of agreement that one of the real problems is that executives are overpaid. If that’s true, then I have an amazing deal for you!
If the executives are overpaid, then these firms could get the same revenue at a lower cost. If you know that executives are overpaid, then you can correct this in one of two ways. First, you can set up a competing firm with executives who are paid what they are really worth. Since you have lower costs, you will be able to capture the market and make money hand over fist. You can take a handsome cut of the profits for yourself and still have a lot of money left over to fund your favorite progressive causes.
Second, you could recognize that starting your own firm might be really difficult and instead just decide to buy out some of the companies that are overpaying their executives. Since you know that this is going on, it should be a can’t-miss deal. Assemble your gang of corporate raiders, acquire controlling interest in (say) McDonald’s, fire everyone at the top, replace them with lower-paid but equally-competent executives, and watch the higher profits roll in. Once again, you can take a handsome cut of the profits for yourself and still have a lot of money left over to fund your favorite progressive causes.
Steven Landsburg once wrote that one of the great things about economics is that it forces us to be very clear about our goals. One of the benefits of a relatively simple model is that it forces us to identify and explain the important moving parts. I recognize that the market for executive talent is pretty complicated, but just as Paul Krugman wrote with respect to criticisms of free trade, most of the people claiming that executives are overpaid probably don’t have in mind nuanced models of the market for executive talent. The exercise here helps us identify exactly where the competitive model breaks down (if it does at all) and therefore helps us move past assertions like “McDonald’s/Walmart/Nike/whoever could afford to pay their workers a living wage if they just paid their executives less.”