Charles Babbage at work. I am grateful to the vice chancellor of La Trobe University, Professor Paul Johnson, for introducing me this morning to the wisdom of the 19th century writer Charles Babbage who argued that the payment of commissions (he called them "bribes") to financial agents would inevitably lead to the mis-spelling of investments. No sooner had I read the Professor's piece in the Melbourne Herald Sun than I stumbled across all those stories of executive pay rises which far outstrip those of ordinary workers. With the Babbage these in my mind it became clear that the principal reason for the outrageous salary increases of the past decade is the influence of those head hunters and executive pay consultants whose fee depends on the amount of remuneration that is eventually paid.
You can apply the same logic to the ratings agencies.
2 comments:
Given they are capitalists, a better quote is their patron saint, Adam Smith, who wrote as follows in "An Inquiry into the Nature and Causes of the Wealth of Nations" (1776):
Quote:…being the managers rather of other people’s money than of their own, it cannot well be expected that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own. … Negligence and profusion, therefore, must prevail, more or less, in the management of the affairs of such a company.
I think that's the bit that is always conveniently overlooked, Dave.
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