Incentives matter. How you are rewarded or reimbursed affects how you act. It is a very difficult problem. For goods and materials the more free the market the better the price discovery. If the price is too high for you, it is because you prefer other goods and so the right thing to do is not to buy because someone else objectively wants the stuff more than you. If everyone knows what is available and how much people can buy - the price is right. When it comes to people, we haven't quite nailed it for various reasons. We don't like the idea of being treated the same as goods so we don't like the idea of creating an open market for our skills. We want to buy into a cause. We look for meaning. We are human.
This creates a problem because price discovery isn't very good when there isn't a market. Fair is very subjective. Price discovery works partly because there are just two variables - supply and demand. How much is there? How many people want it? It has nothing to do with how many hours of effort were put in, how smart the people were, what personal sacrifice they put into producing the goods. These are philosophical questions that have no answer.
Bill Cunningham rejects all this. He says, 'If you don't take money, they can't tell you what to do. That is the key to the whole thing.' Bill has cut his life down to the bare bones of expenses and lives in a storage room of his photographs and spends his days taking pictures of street fashion. He has looked at what is important to him and built a life around it.
'He who seeks beauty will find it' - Bill Cunningham - American Photographer
He is an independent photographer. Independence itself does change the incentives. There are issues around giving academics tenure. This allows freedom to say what they want but doesn't provide any guards against the academic not actually adding value any more but still sticking around. Bill is different since he doesn't take anything. There is no one who is hard done by in the exchange other than himself.
One of my concerns with the 'income equality' debate is how to deal with cases like Bill. He is very happy not being reimbursed. There are some things you can't price and for Bill that is freedom. Ministers/Pastors/Swamis/Monks/Priests that aren't corrupt and lives simple lives and give to the community also receive the benefits of independence (within the confines of their beliefs). It would be silly to try and work out an income that Mothers and Fathers who stay at home to look after their kids 'deserve'. There is no price discovery for that. There is no market.
Once there is a market, there is less debate about what the price is because you know it. It might not feel right to you but you have the option to change. The thing is once there is a price it also changes the nature of the interaction. If you are paying for something, it is no longer a moral transaction. A great example is the introduction of fines for picking up children from school late. Freakonomics gave evidence that this sort of approach has the opposite effect that you would expect. It puts a price on the additional day care and parents feel less guilty because they have 'paid' for the service.
The question becomes how to get the best of both worlds. How to not have people interacting with each other in a way where the power dynamics spoil things? How can the customer and provider end up treating each other well? How can we maintain the benefits of price discovery helping to allocate resources while also trying to hold on to the benefits of something being priceless? Tim Ferris talks of creating 'Muses'. If you are able to build something that can provide the financial support to allow you the freedom to engage with others in an independent way. This doesn't mean you don't charge them. It just means you aren't desperate. You can walk away, and perhaps that is the key to why we treat people in personal interactions better than when money is involved. They can walk away.
Or in Bill's case... pedal.
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