Why do butchers earn more than bakers even though they're typically less educated? What does Uber driver data reveal about wage gaps? In part three of their series on favorite models, Tyler and Alex explore compensating differentials, Adam Smith's insight that wages adjust for a job's pleasantness, safety, and flexibility. But Tyler pushes back: in a world of increasing returns and clustering talent, are we moving toward winner-take-all dynamics where all good things come together instead of trading off?
Then they turn to Mancur Olson's theory of selective incentives. How do small groups organize to lobby for benefits while big groups struggle? And as markets become more competitive and surveillance more pervasive, are the village chieftains who once solved collective action problems disappearing from economic life, or reemerging in a different form?
Transcript: https://www.mercatus.org/marginal-revolution-podcast/compensating-differentials-and-selective-incentives
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Timestamps
- Compensating differentials overview - Segmentation vs. Differentials - Amenities and the gender pay gap - Two Competing Theories - How fixed costs complicate the picture - There are many margins of adjustment! - Mancur Olson and selective incentives - Special interests or bad voters? - The Waxing and waning of selective incentives - Alternatives to Selective Incentives
