Thursday, May 28, 2009

Obviously, Alan Blinder Is Not a Golfer

Oh, Alan, Alan, Alan.

I love ya dearly, but clearly you need to get out more. Get a cup of coffee, see a movie, read a blog or two for chrissakes.
Despite the vast outpouring of commentary and outrage over the financial crisis, one of its most fundamental causes has received surprisingly little attention. I refer to the perverse incentives built into the compensation plans of many financial firms, incentives that encourage excessive risk-taking with OPM—Other People's Money.

What, you say, hasn't huge attention been paid to executive compensation—especially those infamous AIG bonuses? Yes. But the ruckus has been over the generous levels of compensation, or the fact that bonuses were paid at all, not over the dysfunctional incentives that inhere in the way many compensation plans are structured.

Well, I don't know. This guy seems to have been paying attention.

In fact, I might even say he has been beating the dead horse of perverse incentives in the finance sector rather convincingly for some time now.

Oh well, I guess there's no accounting for taste.

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