School of Social Science

Pay for Performance or Performance for Pay: The Economics of the Employment Contract from Roman Times to Our Time

W. Bentley MacLeod
Leon Levy Foundation Member, School of Social Science; Sami Mnaymneh Professor of Economics and Professor of International and Public Affairs, Columbia University
April 26, 2012

Employment contracts are central to many current policy debates. New York City is experimenting with rewarding teachers based on value added in the hope that it will improve performance. Compensation practices in the financial sector are often viewed as a contributing factor to the financial crisis, resulting in increased regulation. At the same time, there are continued calls to reduce the public sector and rely more on market forces. In the 2012 Leon Levy Lecture, W. Bentley MacLeod, Sami Mnaymneh Professor of Economics and Professor of International and Public Affairs at Columbia University, discusses two approaches to compensation: “pay for performance” and “performance for pay.” When preconditions for market supply of goods and services are satisfied, then pay for performance is effective. But when performance is difficult to measure, there is a need to reward performance with pay. MacLeod illustrates these ideas with examples taken from the management of Roman villas from the time of Columella and Pliny the Younger, and explains why the lack of effective management may be a key factor in the poor performance of schools and financial markets.

Education and Equality

Danielle Allen, UPS Foundation Professor
Institute for Advanced Study
November 16, 2011

Current educational policy discussions frequently invoke “equality” as the reigning ideal. But how clear a view do we have of what we mean by this? What exactly are we trying to achieve? In this lecture, Danielle Allen, UPS Foundation Professor in the School of Social Science, revisits the question of how to understand the ideal of equality in the context of educational policy.

Elections and Strategic Voting

Eric S. Maskin
Institute for Advanced Study
May 6, 2011

U.S. presidential elections often drive many citizens to vote strategically—to vote for a candidate they do not like in hope of preventing someone they dislike even more from winning. Many who favored Ralph Nader in the 2000 election ended up voting for Al Gore (though not enough to stop George W. Bush from getting elected). And a lot of those inclined toward Ross Perot in 1992 voted for George H. W. Bush instead (though Bill Clinton still won). An electoral system that induces widespread strategic voting, which is hardly unique to America, is undesirable for many reasons. Most obviously, it deprives citizens of the chance to express their views without fear that doing so will lead to the election of someone they strongly oppose. In this lecture, Eric Maskin, Albert O. Hirschman Professor in the School of Social Science and winner of the 2007 Nobel Memorial Prize in Economic Sciences, discusses how to design electoral systems that do not put voters in this bind.