Analistas 25/05/2015

A breakdown of social norms

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His story went like this: When football games started being televised in the United States, the financial rewards for winning teams shot up, so star players began getting big salaries. C.E.O.s, who watch a lot of football, noticed - and they said to themselves, “Why not me?”

If salaries were set in a competitive marketplace, that wouldn’t have mattered, but they aren’t. Chief executives appoint the committees that decide how much they’re worth, and are restrained only by norms about what seems like too much pay. Football, so my conversation partner averred, started the breakdown of those norms, and we were off to the races.

Now, on first hearing this sounds ridiculous - surely huge historical changes must have deeper roots. But I found myself thinking about this conversation recently after reading an interesting blog post by Vera te Velde, an economist at the University of Queensland School of Economics in Australia, on tests of the “broken windows” theory, which says that people are more likely to break social norms if they see other people violating them, regardless of whether the norms being violated have anything to do with one another. You grab handbags if you see graffiti, for instance, or you litter if you hear people ignoring noise ordinances. As Ms. te Velde noted, there is now overwhelming experimental evidence that supports that theory (read her post here: bit.ly/1Hjs35b). So it’s not crazy to think that C.E.O.s might start violating pay norms because they see quarterbacks getting big checks.

O.K., you don’t have to place sole emphasis, or any emphasis at all, on football. The real point here is that the eruption of top incomes that began around 40 years ago need not have solid causes - it could be a case of contagious norm-breaking. This might also explain why movements of top income levels are so different in various countries, with the most obvious determinant being whether you speak English. Think of it as an epidemic of broken windows in the United States, which spreads to countries that are culturally close to America, but not so much elsewhere.

This is all very loose speculation, the sort of thing that once upon a time a serious economist wouldn’t put out in the public sphere. But I hear all these people saying stuff, and figured that I might as well … O.K., never mind.

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