Polish Regulator Salaries
One of the under-discussed elements of financial regulation is the question of personnel. To have an effective regulatory regime, you need to not only have good rules on the books you need effective personnel. There are a few aspects to this. One you need a sufficient quantity of people to actually keep up with what’s happening. Two, the people need to be sufficiently smart and well-informed to figure out what’s happening. Three, the job has to be worth doing for some reason other than to gain experience before cashing in and flipping to the other side—nobody’s going to do a good job if the incentives are to do a bad job. Last, the people running the agency need to be prestigious enough to win political battles. Everyone understands that it’s politically problematic to be seen as ignoring advice from generals; it’s not clear that anyone fears paying a price for not listening to career staff at the Office of the Comptroller of the Currency.
Felix Salmon describes Joe Stiglitz describing Poland’s efforts to grapple with some of these issues. They employ a screen-door submarine innovative compensation model:
Stiglitz is a fan of the Polish framework. Poland, he says, has one overall regulator, which then has separate commissions with solid institutional knowledge for each of the areas, like insurance and banking, which need to be regulated. He also like the way that the Poles index the salary of the regulator to salaries in the financial sector. Financial-sector salaries are taxed at a set percentage to fund the regulator’s salary, ensuring that the regulator’s salary keeps up with financial-sector wage inflation.
There’s some logic to this. At the same time, it seems a bit perverse to give regulators such a direct incentive to see the regulatees’ salaries get up as high as possible. We probably do need higher salaries for select elements of the civil service. But I would emphasize that fundamentally public sector careers are rarely made attractive primarily through financial methods. Military officers in the United States don’t make a ton of money, but they’re very well-respected. And since they’re well-respected, it’s an attractive career for a lot of people. And since it’s an attractive career for a lot of people, it attracts people worthy of respect. You see a similar virtuous circle with teachers in Finland.
8 Responses to “Polish Regulator Salaries”
Register
RSSLogin
Topic Cloud
ArchivesBlog RollAbout Matt YglesiasContact Me
Donate
September 27th, 2009 at 11:07 am
it seems a bit perverse to give regulators such a direct incentive to see the regulatees’ salaries get up as high as possible
Any regulator trying to play this in a self-interested way would come up against a collective action problem, right? His individual decisions can only do so little to raise the salary of the entire sector, and the personal costs of doing his job badly would swamp any expected gains. The only way this could work is if all the regulators formed a big financial salary raising Leviathan to punish defectors. I don’t think they could pull that off.
September 27th, 2009 at 11:23 am
The thing neither Matt, nor Neil, understand about the incentives governing Polish regulation is
zzzzzzzzzzzzz …….
September 27th, 2009 at 11:45 am
Re Matthew “Military officers in the United States don’t make a ton of money, but they’re very well-respected. And since they’re well-respected, it’s an attractive career for a lot of people. And since it’s an attractive career for a lot of people, it attracts people worthy of respect.”
————
You haven’t been in the military, have you Matthew?
The military has many people deeply worthy of respect –probably more than the civilian population –but
The virtuous people tend not to rise above Colonel in the Army or Captain (in the Navy). Or the lower ranked Captain (in the Air Force.)
It’s called “falling on your sword” (trying to do the right thing.)
There are numerous exceptions but in general the Admirals and Generals are “political”. In the same way corporate executives and Wall Street executives are “political”.
September 27th, 2009 at 11:49 am
And the virtuous in the senior military leadership tend to get chopped in the neck by the civilian leadership –witness what Rumsfeld and the Neocons did to General Shinseki when he simply told the truth re the size of the army needed to occupy Iraq.
How many Americans died because of Rumsfeld and Bush’s attempt to grab the oil on the cheap?
September 27th, 2009 at 2:48 pm
“regulatees’ salaries get up as high as possible.” is not what’s important in the Polish setup. This would be difficult (at best) for them to engineer.
What’s important is this scheme strikes a balance by reducing the incentives for adversarial or conspiratorial relationships.
September 28th, 2009 at 3:28 am
Anybody see 60 minutes? McChrystal was interviewed. The man is Spartan. Literally. He eats once a day and his quarters consist of a bunk, a closet, and a lamp. He despises largesse. One thing for sure, there won’t be any 40 million dollar officer swimming pools built on his watch.
I found him impressive. He was fairly open and honest. He essentially conceded the possibility that our strategy in Afghanistan has been pointless up until now. He was highly critical of not only our ignorance of Afghani culture but our reluctance to make any attempts to understand it, despite having been there for eight years.
Obviously, whether he is up to the task remains to be seen. He is not in it for the money, that’s for sure. But it seemed to me he is not in it for glory or power either. He seemed to have a classic military mindset, the only purpose of his existence is to accomplish whatever mission is given.
Note: One thing I found very troubling. McChrystal has only talked to Obama once since assuming command. Does that seem normal?
September 28th, 2009 at 10:06 am
“Anybody see 60 minutes? McChrystal was interviewed. The man is Spartan. Literally. He eats once a day and his quarters consist of a bunk, a closet, and a lamp. He despises largesse. One thing for sure, there won’t be any 40 million dollar officer swimming pools built on his watch. ”
You forget how he works 30 hours per day, and still manages to roam Afghanistan, catching bullets in his teeth.
September 28th, 2009 at 7:25 pm
On the other hand, people get really pissed at government officials making a ton of money. So, if you have a regulator who makes a ton of money because his salary is tied to the salaries of the people he’s regulating, when people bitch and moan about the salary you can just blame the sector for the problem. And then maybe that old-school Populism kicks in and you start to see people supporting more redistributive policies.
Or not. I’m just spitballin’ here.