Marginal-productivity explanations of executive pay are tautological and misattribute organizational outcomes

Evidence

An alternative interpretation of the effect of financialization on inequality is that the productivity of managers and capital has risen as a result of financial investment strategies. If this was the case, then increases in capital’s and officers’ share of income simply reflect increases in their marginal productivity in the era of financialization. We find this interpretation unsatisfying on multiple levels. First, since productivity is not observed but inferred circularly in terms of income distributions, any marginal productivity interpretation is tautological in essence. Second, this interpretation depicts productivity as an individual attribute rather than an organizational outcome that is embedded in a particular social configuration of production. — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 175

Categorization

• XREF: Connects to the classic economics critique of the marginal productivity theory of distribution; contrasts with the political/social account of income shares. — connects to: Corporate outsourcing and CEO pay inflation stem from neoliberal theory, not efficiency — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 175; Marginal productivity accounts of executive pay are tautological and mask political power — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 175; Marginal-productivity theory functions as claims-making discourse rather than wage science — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 180
• DEEPTHINKING: A dense dismantling of the marginal-productivity justification for top income shares, packaging tautology critique, organizational-embedding, and political-nature arguments into one compact case.

Related

• Marginal productivity accounts of executive pay are tautological and mask political power (similarity 0.95)
• Marginal-productivity theory functions as claims-making discourse rather than wage science (similarity 0.87)
• Corporate outsourcing and CEO pay inflation stem from neoliberal theory, not efficiency (similarity 0.84)
• Inequality dimensions reflect one institutional shift toward financialization (similarity 0.81)

Broader Connections

• Corporate outsourcing and CEO pay inflation stem from neoliberal theory, not efficiency #expands (0.78) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 175