Cornell University economist Robert H. Frank sat down with Chrystia at the Aspen Ideas Festival to chat about the earnings potential of superstar dentists and world-class sopranos, the unlikelihood of an Atlas Shrugged-esque strike of the elites and Charles Darwin’s contributions to economic thought. Here’s a transcript of some of the highlights of their conversation.
On the upsides and downsides of the winner-take-all phenomenon
CHRYSTIA FREELAND: If the super-talented are getting super rewards, maybe in the past they were not getting the appropriate rewards. I mean, maybe this is really American capitalism working the way most Americans want it to work.
ROBERT H. FRANK: Well there are two things in your question. One is the upside of the whole phenomenon is that we now get to listen to the best soprano rather than the hundredth best. In 1890 there were 1,300 opera houses in the state of Iowa alone. You had to listen to music live and in-person. You couldn’t hear the best soprano because she couldn’t be everywhere at once. Now there’s a contest to see who the best soprano is. That winner then records the master disc and get’s stamped out onto CD’s at virtually no cost so we could all listen to the best soprano.
That’s the upside. The downside is that there’s been a huge concentration of wealth and income that’s occurred because of this. If you thought you needed those concentrated rewards to get people to put forth effort in these domains, that would be one thing. But there’s absolutely no evidence of that. People just want to be the best performer whether or not–
CHRYSTIA FREELAND: People don’t work for money?
ROBERT H. FRANK: They do work for money. So if you didn’t give them any money, they — but there’s this odd vision that if the forty vice presidents of a big corporation who want to be CEO faced a slightly higher tax rate, they’d all knock off on Friday and play golf in the afternoon. There are lots of reasons to want to be the CEO of a big company. After-tax pay is not the primary one among them.