In an era when our media and even our education system exalt emotions, while ignoring facts and logic, perhaps we should not be surprised that so many people explain economics by "greed."
Today there are adults -- including educated adults -- who explain multimillion-dollar corporate executives' salaries as being due to "greed."
Think about it: I could become so greedy that I wanted a fortune twice the size of Bill Gates' -- but this greed would not increase my income by one cent.
If you want to explain why some people have astronomical incomes, it cannot be simply because of their own desires -- whether "greedy" or not -- but because of what other people are willing to pay them.
The real question, then, is: Why do other people choose to pay corporate executives so much?
One popular explanation is that executive salaries are set by boards of directors who are spending the stockholders' money and do not care that they are overpaying a CEO, who may be the one responsible for putting them on the board of directors in the first place.
It makes a neat picture and may even be true in some cases. What deals a body blow to this theory, however, is that CEO compensation is even higher in corporations owned by a few giant investment firms, as distinguished from corporations owned by thousands of individual stockholders.
In other words, it is precisely where people are spending their own money and have financial expertise that they bid highest for CEOs. It is precisely where people most fully understand the difference that the right CEO can make in a corporation's profitability that they are willing to bid what it takes to get the executive they want.
If people who are capable of being outstanding executives were a dime a dozen, nobody would pay eleven cents a dozen for them.
Many observers who say that they cannot understand how anyone can be worth $100 million a year do not realize that it is not necessary that they understand it, since it is not their money.
All of us have thousands of things happening around us that we do not understand. We use computers all the time but most of us could not build a computer if our life depended on it -- and those few individuals who could probably couldn't grow orchids or train horses.
In short, we all have grossly inadequate knowledge in other people's specialties.
The idea that everything must "justify itself before the bar of reason" goes back at least as far as the 18th century. But that just makes it a candidate for the longest-running fallacy in the world.
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