What potty training reveals about excessive executive salaries.

The economic mysteries of daily life.
Jan. 13 2007 6:52 AM


What potty training reveals about excessive executive salaries.

(Continued from Page 1)

Unfortunately, as Lazear and Rosen were well aware, tournaments also have unwelcome features. They discourage cooperation: One study of Australian companies discovered that workers facing tournament-style pay structures were less likely to call in sick, but also less likely to share tools with each other.

Still, tournament theory explains a lot about office politics and the inequities of working life. The CEO's pay, it turns out, is not designed to motivate him but to motivate potential successors. Think of it as a sort of "lifetime achievement" award for somebody whose productive contribution is long over.


Since we did not have twins, I will not be able to put tournament theory into practice at home. Perhaps the idea is a little potty anyway.

Tim Harford is a Financial Times columnist. His latest book, The Logic of Life, will be published in paperback on Feb. 10.

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