Wednesday, March 7

The Public Philosopher - Should a banker be paid more than a nurse?

I was invited to this lecture by Professor Michael Sandel who is a professor of political philosophy at Harvard. Unfortunately I cannot make this lecture as I have to go to a charity fund raising dinner where we are trying to raise some dosh for one of my charities. So I figured, why dont I pen down my thoughts here specially I belong to one side of the argument. Bit disjointed but here we go.

  • I look forward to the next lecture where we will be debating “Should a nurse be paid more than a street cleaner”. A street cleaner seems to earn £6-8/hour which roughly equates to £14,000 per year on the higher rate of £8/hour. A nurse on an average band 5 makes about £24,000 per year. So this argument should be interesting indeed.
  • Now for some theory. We are all basically adding value of some kind or other. Whether I am a prostitute, an engineer, a pilot, farmer, parent, a hair dresser, politician, banker, or what have you, we are all adding some value of some kind.
  • We take something, plonk in something additional, create a slightly different thing, and then pass it on. In return, we get some dosh. This argument holds true for all human economic activity.
  • So then the question comes, what is this value? So what are the numbers we are talking about? The UK’s official graduate careers website says that a typical salary after 10-15 years for a banker is about £50000-100,000. Assuming the top number, a banker gets about 4 times a nurse’s salary. So does a banker add four times the value of a nurse?
  • To answer that question, we need to know how do we ascribe a value to this value addition. Again, very simplistically, we first find out what is the value of the inputs. Then we try to find how many and what kind of “stuff” you will require to add value for a range of outputs with different values. Take a simple example. I have some sand and some more chemical stuff. These are my inputs to make glass. Its cheap as sand, yes? Then we have to figure out what outputs we need? Glass can be used to make different bits and stuff. For example, this LEICA APO TELYT-R 1:5.6/1600mm lens is worth about 2.02 million dollars. Its glass. A glass tumbler of this kind will cost you £7. Now both of these were made by glass makers. But as you can appreciate, the outputs can vary tremendously. So lets ask a blunt question. Will you pay the same amount for the LEICA technician as for the tumbler glassmaker ? If you do, I have a great bridge for sale for you.
  • Now the above glass example was very simplistic, but there was a reason for this. I showed that despite the inputs and outputs being comprised of the same, the value added by the intervening labourer (LEICA technician versus tumbler glassmaker) is seriously different. Also you need to figure out how many LEICA technicians are available versus glass makers. How long it takes to train them, etc. etc. as the laws of demand and supply comes into the picture as well to do the valuation.
  • And before you think this is a new debate as this blog post seems to think, the question of a just price has a very old pedigree including people like Thomas Aquinas who talked about usury. Fascinating, how these new arguments just are rehashing of old ones. Btw, I dont think these new chaps would appreciate that they are simply following some very dodgy religious teachings which you can see in Islam and Christianity and Judaism and and and.
  • So lets get a bit more complicated. How do we compare the salaries of a banker with a nurse? Based upon how we are calculating it, we should compare the inputs, the outputs and the intervening value added, eh?
  • So who wants to take a shot at trying to figure out how to compare the inputs to the banking industry versus the inputs into the healthcare industry? Does the phrase “comparing apples and oranges” come to mind? In this particular case, we seem to be comparing apples (nurses) with a black scholes equation (bankers).
  • You can quibble about the differences in value of the outputs (a banking system versus a nursing system, a loan versus a healthy patient) or what have you, but then that argument very soon descends reductio ad absurdum to whether we need to have a capitalist system which measures value by money. Wake me up when you have decided to measure value with cowrie shells.
  • In my view, therefore, I have better things to do than to sit there listening to silly arguments. If I had time to do that, i will sit and listen to my daughter tell me how I should cook brownies every day.

I will leave you with this great little clip about glass.

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