Sunday, November 25, 2007

Inequality as incentive pay

The posts on the Vatican's adoption of incentive pay and on the real meaning of Thanksgiving generated a lot of e mail. A year ago, Peter Klein posted a more complete story of the first Thanksgiving:
Faced with potential starvation in the spring of 1623, the colony decided to implement a new economic system. Every family was assigned a private parcel of land. They could then keep all they grew for themselves, but now they alone were responsible for feeding themselves. While not a complete private property system, the move away from communal ownership had dramatic results.
Private property turns each landowner into a residual claimant, able to claim the surplus production after all the costs have been paid. The resulting inequality(some farms produce more than others) is necessary to create incentives to produce. Similarly the Vatican's incentive pay creates inequality which gives its workers the incentive to produce.

Note the Pope's earlier critique of Capitalism:
“...with the cruelty of capitalism that degrades man into merchandise, we have begun to see more clearly the dangers of wealth and we understand in a new way what Jesus intended in warning us about wealth.”

1 comment:

  1. The early Plymouth story is similar to that of the Jamestown colony. The incetives, such as they were, led to significant idleness and shirking. As land became privatized, productivity increased significantly.