Economists’ models make the news

January 31, 2012

The Guardian: “Who came up with the model for excessive pay? No, it wasn’t the bankers – it was academics“.

“In 1990, Michael Jensen and Kevin Murphy published one of the most famous papers in economics, which first appeared in the Journal of Political Economy and then in the Harvard Business Review. Its argument is well summed up by the latter’s title: “CEO Incentives: It’s Not How Much You Pay, But How.”  The way to get better performance out of bosses, argued the economists, was by giving them a bigger financial stake in their company’s performance”.

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