Nate Silver tells us why the “bonuses” dished out at AIG (ultimately at the tax-payers’ expense) never were proper bonuses. And why a lot of bonuses aren’t, in fact, bonuses.
…I’m just not all that excited about confiscating the “bonuses” paid to the AIGFP employees. Rather, I’m interested in compensation and incentivization structures in general. Aggregate compensation throughout the financial services industry, I would guess, is much higher than is economically optimal (there is a lot of evidence that this is true of CEO pay). A lot of people are getting paid for what is thought to be skill but is really just luck (or economic rent).
As they say: Read the whole thing.