From Professor Bainbridge, Jan. 2016:
I have been reading with great interest William Caferro's biography John Hawkwood: An English Mercenary in Fourteenth-Century Italy It interests me both because of my longstanding interest in military history and because, as Caferro notes:*In 2008 as recounted in 2016's "Ransomware: In Which Izabella Goes All 14th Century Condottieri":
Mercenary bands were corporate in structure. The captain stood at the head of his brigade in a manner similar to the way a modern CEO stands at the head of his firm. When the captain decided to leave, the company did not disband but retained its name and elected another man. (Kindle Locations 1511-1513).And here's a really interesting fact about those companies: the most famous and successful condottieri got paid a very substantial multiple of what the common soldiers made.
The famous Italian mercenary Giovanni d’Azzo deli Ubaldini earned an impressive salary of 500 florins a month in Sienese service in 1381. But his cavalrymen earned only 6 florins a month .... (Kindle Locations 1665-1667).Granted, a multiple of 83 to 1 is lower than the multiple earned by many of today's top CEOs. But it's still a very dramatic difference.
What's going on here? There are two basic theories of executive compensation: managerial power and arms'-length bargaining:
The so-called principal-agent problem arises because agents who shirk do not internalize all of the costs thereby created; the principal reaps part of the value of hard work by the agent, but the agent receives all of the value of shirking....MORE
Years ago I got into an online argument at what was then the Wall Street Journal's flagship blog, MarketBeat, with someone over the ineptitude of the behemoth pension fund CalPERS and I somehow took a meander into the mid-1300's:
8:28 am June 3, 2008....
Climateer wrote :
Re: Classical Economics,
Why only go back to Ricardo or Smith? 14th century Classical econ. says what’s yours that I can take by force of arms is mine.
Now that’s classical, baby.
Human society develops rules of conduct to facilitate the greater good.
The intellectual field was called “Political Economy” for a reason....
12:02 pm June 4, 2008CalPERS got crushed in the financial débâcle that was already apparent in 2007 (quantquake, Northern Rock), underperforming 90% of its peers and resorting to amateur behavior like selling liquid assets to maintain losing positions in the illiquid.
Climateer wrote :
Thanks for the econ lesson. Here’s one for you.
The use of force verbiage is short-hand for the evolution of economic thought in just the last 700 years. The economics of the 14th century was the econ of the Condottieri.
Force of arms trumped all.
In response societies developed rules of conduct, laws, to codify what constitutes acceptable (and unacceptable) commercial behavior....
Anyhoo, I was reminded of John Hawkwood and his merrie band of freebooters by this at FT Alphaville:
On the economic power of ransom....
*****Ending with our outro:
Old school rent extraction device