Two economists are walking down the street. One sees a $20 bill lying on the sidewalk and says, “Look at that $20 bill!” The second economist responds, “Nah, that’s not a $20 bill. If it was, someone would have picked it up already.”
How much does a CEO make compared to the average worker? If you’re like most Americans (many economists included), you probably have an estimate in your head that roughly translates as “too much.” Pressed for a number, you might come up with a figure around 30 to 1.
At least, according to a recent article published in Psychological Science by Anuj K. Shah, Eldar Shafir and Sendhil Mullainathan. In a series of studies, Shah and colleagues examine how scarcity—not having enough of a precious resource such as time or money—affects people’s perceptions of value.