buckley, failure, evolution

i don’t know much about william f. buckley, but my impression has always been that he's a laissez faire kind of guy. his rant on high corporate salaries confuses this understanding:

That money was taken, directly, from company shareholders. But the loss, viewed on a larger scale, is a loss to the community of people who believe in the capitalist free-market system. Because extortions of that size tell us, really, that the market system is not working in respect of executive remuneration. What is going on is phony. It is shoddy, it is contemptible, and it is philosophically blasphemous.

buckley’s concerns are common, and understandably so for those unconvinced that market mechanisms shake out efficiently. admittedly, the situation is complicated and may involve government sneakery. however, in essence he’s probably right - not linking executive compensation to company performance seems like a bad idea. practices such as market-based management are likely much better. however, as with most theories, we can’t be certain.

on the assumption that there is actually one right way to structure executive compensation, it seems that evolution is the best way to give us an answer. if rewarding on a performance basis actually improved performance, companies with such a policy would outlast (or at least outperform) less wisely run enterprises.

buckley says that any losses due to the prevalent system are a “loss to the community of people who believe in the capitalist free-market system,” and goes on to say that clearly, here, the market system is not working. this is where he’s wrong. failure means the market is working. it's is a vital market signal that tells us what doesn’t work, something we can only know experientially via this evolutionary process. the information contained within failure will prevent others from making the same mistakes, improve business practice, and - i believe - ameliorate the problem he decries.

Labels: economics, ideology