An interesting op-ed, “It is time to treat Wall Street like Main Street,” appeared in Thursday’s Financial Times. Written by George Akerlof, a professor of economics at Berkeley and a Nobelist in 2001, and Rachel Kranton, a professor of economics at Duke, this little (but challenging) piece follows from their recent book Identity Economics, which I have not read and probably could not understand. The book itself follows from an essay, “Economics and Identity,” published by the Quarterly Journal of Economics in 2000. I think I understand it. In any case, A. and K. are literate and funny. And, as for really funny, I recommend Akerlof’s 2001 autobiographical lecture (courtesy of Nobelprize.org).
Anyway, “It is time to treat...” is a critique of the current practice of remuneration and bonus on Wall Street. It undercuts the whole logic--or false logic--of incentive pay. The essay should clarify the views of many Democrats who are themselves unsure of what is right--that is, efficient and ethical at once. After you read this piece, you should read Larry Grafstein’s essay in TNR last year dealing with same conundra.