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Dock Him $10 for This Post…

October 17th, 2007 · 4 Comments

Ezra has a very weird post expressing bemusement that pundits are big fans of merit pay yet themselves immune from such accountability. Which is a clever point, except that… what!? Yes, yes, the Atlantic bloggers’ paychecks don’t shift with last week’s traffic, but is Ezra suggesting that the pay a writer or TV/radio host commands isn’t generally a rough function of readership/ratings and perceived influence? Ezra asks rhetorically:

Does The Atlantic pick through reader mail and commission surveys to evaluate how much interest is generated by Clive Crook’s work, and then reconsider his contract based off those metrics? Of course not.

Except… magazines do commission surveys to evaluate reader interest in different parts of the publication. Presumably they’re not doing so out of idle curiosity, but to find out what readers want more of, and what they could do without.

Now, this obviously isn’t formalized to the extent that merit pay schemes might be. Partly, that’s because we expect things to operate a bit more formally in a (nominally) publicly accountable massive government bureaucracy. Mostly, though, it’s because pundits operate in this thing called a “market.” The Atlantic pays whatever it needs to keep Clive Crook from getting poached by some other publication, at least up to the amount they’ve determined Clive is worth to the magazine in readers and prestige. And in a genuinely competitive education market, we could presumably dispense with all the formal trappings of “merit pay” as well: Parents would want to send their kids to schools with teachers who get results, and schools would pay what it cost to keep those teachers (and the customers who prize them) around. Formalized merit pay is a way of substituting for that, given that we don’t have a genuinely competitive education market, so it shouldn’t exactly be shocking that the mechanisms look different from one sector to another.

Update: Yglesias observes that lots of the glossy political mags are “isolated from market forces.” What he means is that most of them aren’t for-profit enterprises, which isn’t exactly the same thing. Wherever a particular class of publications get their money, they’re still competing to attract talented writers. Schools are as well, of course, but the public ones, at least, clearly aren’t doing so in the same way, insofar as they’re constrained in the sorts of incentives they can offer particularly effective teachers.

Now, this does mean that an “effective” journalist will be defined not merely by her marginal contribution to the number of issues moved, but by the extent to which they satisfy owners and donors, who may place a higher premium on advancing a particular ideology or fomenting a certain kind of discourse than on maximizing subscription or ad revenue. Which is just to say the reader isn’t the sole “customer,” and there isn’t any single, universal form of journalistic “merit.” Of course, the same is probably true of pedagogical merit, which is another reason it would be nice to have a genuine, parent-driven education market.

Tags: Markets



4 responses so far ↓

  • 1 SomeCallMeTim // Oct 17, 2007 at 3:11 pm

    Does whether the Atlantic operates in the black matter at all to your argument?

  • 2 Julian Sanchez // Oct 17, 2007 at 3:39 pm

    Not really, no.

  • 3 SomeCallMeTim // Oct 17, 2007 at 9:50 pm

    Yglesias elaborates what I was wondering/suggesting. Which, as you indicate, suggests that the market in which writers compete is not a simple model market. And, as you also acknowledge, this might also be true of the teaching market.

    The incentives might be screwed up, but it’s not as if incentives don’t exist in teaching (admittedly, “I suspect”). And I don’t think it’s the least bit clear that parents are the obvious customers.

  • 4 Ryan // Oct 19, 2007 at 4:47 pm

    “Formalized merit pay is a way of substituting for that, given that we don’t have a genuinely competitive education market…”

    I would have said that merit pay is a way of aligning the incentives of firm and employee, and that the prevalence of merit pay will depend on things like the risk aversion of the firms & employees, the “exogenous” variance of output, the difficulty of measuring output, and so on. Competition and the zero profit condition in the final goods market may actually compel firms to implement some sort of merit pay scheme so as to induce the efficient level and allocation of effort.

    In a more empirical vein, labor economists have been surprised by how infrequently firms use true merit pay compensation. One of the big concerns is that paying for output on some dimension (but not on another, unobservable dimension) may badly distort the employee allocation of effort.

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