MARCUS: How much is too much when it comes to compensation?

Back to TopCommentsE-mailPrintBookmark and Share
Morton Marcus

This month, as you watched the gallant Butler University basketball team uphold the honor of the Hoosier state, did you wonder about the compensation of college coaches and their future NBA stars? I wanted to focus on the game, but Cousin Candy Marcus was asking her usual question, “Now how much does that one get paid?”

She wanted to know about the compensation package for Coach K of Duke University and “that cute boy who coaches Butler.” She had heard that Coach Tom Crean of Indiana University made more than the IU president and was filled with wonder.

“Is it all ‘supply and demand’?” Cousin Candy asked, drawing on her vast knowledge of catch phrases.

“Yes,” I replied, determined to watch a key free throw and not to be drawn into a discourse on economic intricacies.

“But,” she continued, “basketball coaches are not all the same, not like tons of coal, not—as economists would say—‘homogeneous factors of production.’ They are different, one from the other, and the circumstances under which they will have to perform in their future jobs are likely to be dissimilar from those of their past positions. Aren’t the ‘information costs’ in such circumstances unknown and incalculable?”

“Yes,” I mumbled as an inbound pass by Duke turned into an easy layup.

“As I see it,” Candy proceeded, “the pay people get for their jobs is still a mystery despite two centuries of work by economists.”

“True,” I replied, after prying my teeth from my bleeding tongue.

“You economists like to teach that compensation is set by the value of the addition to output provided by the last worker added. How does that work in sports, or any part of the real world?” she said.

“It’s a concept,” I blurted as a timeout was called. “It’s a simplified way of understanding complex relationships involved in many diverse interactions.”

“But,” Candy insisted, “how does any employer know what the value of something will be? How does the board of a corporation know what added profit will be generated by a new CEO? How does the general manager of a football team know what a new running back will do for the team? Wouldn’t it be better to base pay on accomplishments rather than the uncertainties of expectations? And how does the boss separate out the contribution of an individual from that of the team?”

“Experience!” I cried in desperation.

Candy smiled and said quietly to emphasize my outburst, “Oh, I know all about experience; it’s what you gain from making mistakes.”

All was silent in the room except for the TV announcers and the crowd’s frenzy at Lucas Oil Stadium. Then Candy spoke softly, as to herself: “These are the central questions of our times. How much should teachers, doctors and politicians be paid and on what basis? What is appropriate compensation for executives compared to workers? What part of the revenue of a firm should go to the owners now as dividends and what part should be put aside for debt reduction, product or efficiency improvements, or societal concerns?”

“Let the market decide,” I whispered, exhausted by both the game and her incessant interruptive questions.

“Isn’t that the problem?” she asked. “We have stopped asking these questions and given the default answer that the market should decide. Isn’t that admitting we don’t have any standards or set of values? Letting the market decide means accepting a form of chaos, yielding to a quasi-religious belief in a mysterious supernatural power. Is that what you are saying?”

“Candy!” I lost control. “I’m not saying anything! I’m watching a basketball game! Let me do that in peace!”

But she would have the last word. “There won’t be any peace until we find a better way of determining who gets what in this world.”•


Marcus taught economics for more than 30 years at Indiana University and is the former director of IU’s Business Research Center. His column appears weekly. He can be reached at mmarcus@ibj.com.


Post a comment to this story

We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
You are legally responsible for what you post and your anonymity is not guaranteed.
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
Subscribe to IBJ
  1. I think the poster was being sarcastic and only posting or making fun of what is usually posted on here about anything being built in BR or d'town for that matter.

  2. Great news IRL fans: TURBO the IMS sanctioned movie about slugs running the Indy 500 has caught the Securities and Exchange Commission because Dreamworks had to take a $132MILLION write down...because the movie was such a flop. See, the Indy/IMS magic soiled another pair of drawers. Bwahahahahahaha! How's CARTOWN doing? HAHAHAHA...Indy is for losers.

  3. So disappointed in WIBC. This is the last straw to lose a good local morning program. I used to be able to rely on WIBC to give me good local information, news, weather and traffic on my 45 minute commute.Two incidents when I needed local, accurate information regarding severe weather were the first signs I could not now rely on WIBC. I work weekend 12 hour nights for a downtown hospital. This past winter when we had the worst snowfall in my 50 years of life, I came home on a Sunday morning, went to sleep (because I was to go back in Sunday night for another 12 hour shift), and woke up around 1 p.m. to a house with no electricity. I keep an old battery powered radio around and turned on WIBC to see what was going on with the winter storm and the roads and the power outage. Sigh. Only policital stuff. Not even a break in to update on the winter storm warning. The second weather incident occurred when I was driving home during a severe thunderstorm a few months ago. I had already gotten a call from my husband that a tornado warning was just southwest of where I had been. I turned to WIBC to find out what direction the storm was headed so I could figure out a route home, only to find Rush on the air, and again, no breaking away from this stupidity to give me information. Thank God for my phone, which gave me the warning that I was driving in an area where a tornado was seen. Thanks for nothing WIBC. Good luck to you, Steve! We need more of you and not the politics of hatred that WIBC wants to shove at us. Good thing I have Satellite radio.

  4. I read the retail roundup article and tried Burritos and Beers tonight. I'm glad I did, for the food was great. Fresh authentic Mexican food. Great seasoning on the carne asada. A must try!!! Thanks for sharing.

  5. John, unfortunately CTRWD wants to put the tank(s) right next to a nature preserve and at the southern entrance to Carmel off of Keystone. Not exactly the kind of message you want to send to residents and visitors (come see our tanks as you enter our city and we build stuff in nature preserves...