Ariely conducted a number of social experiments with unexpected results, as covered in a summary of his book that was posted a little while ago on HN:

http://bookoutlines.pbwiki.com/Predictably-Irrational

The "Cost of Social Norms" section is the one relevant to his points in the article.

From how eager they are to return the TARP money, it looks like they are more willing to work for $10 million a year plus stock than $500,000.

Yeah, not quite what the article was about, but it's ridiculous what some people expect for adding so little value.

It is not obvious to me that banking executives add "little value" as a general proposition. (Sure, a lot of them look like idiots today. I suspect this state of affairs will not persist to the end of time.)

Most of us here work on the Internet, right? Our businesses are essentially one big lever to apply intellectual capital, right? And every change is multiplicatively effective, right? 1% more signups is a 1% increase to the bottom line. 1% higher average ticket price is a 1% increase to the bottom line. 1% more traffic is a 1% increase to the bottom line. Each of these compounds.

Banking is like that, except it is one big multiplicative engine for capital capital instead of intellectual capital. Sitting at the top of the $100-billion-in-assets-under-management capital multiplication engine is an executive or ten. What is the 1% difference in outcomes between candidate A and candidate B worth to the firm? Well, if its multiplicative... oh, dear. (I know crony capitalism has caused a bit of the salary inflation -- but don't assume there is no fire just because you see a lot of smoke.)

Relative income parity, the historical norm for the vast majority of people for the last several thousand years, is an accident because historically everyone was operating under the same constraint: you can only labor for 24 hours a day. Some of us no longer operate under that constraint, because our particular combination of talents, skills, and markets do not measure productivity in hours. Our skills are super-scalar.

And, in a world with any skills that are super-scalar, income equality is doomed.

We saw hints of it in the last two bubbles, which might get dismissed because they were covered up by frothy madness. But I make something approaching the mean national income while sleeping just because I sell programs and selling programs scales really freaking well. Far, far better than selling programming expertise, which is a fairly well-paid field of endeavor to begin with.

Dan Ariely talked about this recently on C-SPAN's Book TV, and I (being a nerd) watched the entire thing.

"[...] if we pay them nothing, people work. If we pay them a little bit of money, people get demotivated. It switches us from a social domain to a market domain."

"I actually think the right salary for these bankers should have been zero."

http://www.c-spanarchives.org/library/media/player.php?pid=2...;

Because zero is obviously a temporary value, whereas 500K could potentially be forced into a standard income.

how about no pay restrictions but put every banking executive's salary on whitehouse.gov. now shame and pride figure equally.

This will not work. As shown by CEO pay, publicizing this data led to people feeling like they were in competition for higher and higher wages.

CEO wages increased massively as a result.