If Only It Were This Easy

Nate Silver, the very smart statistician who runs FiveThirtyEight, has a novel idea for how we should handle regulation of the financial industry. We should make government salaries higher, so the smartest people will have more incentives to move into regulation, rather than on to Wall Street! Nate writes:

This is a very real problem. Some of the work that I did in my first job after college at KPMG involved valuing intellectual property in conjunction with international tax disputes. We had our economists, and the IRS had theirs. The thing was, however, that our economists were better than the IRS's, because if someone at the IRS was any good, we'd hire them away and treble their salary. Part of a good regulatory reform plan, then, would be to increase the salaries paid to employees at institutions like the Fed, the Treasury, the IRS, and the FDIC.

I also happen to think that's an awesome idea, but, sadly, it is not remotely as easy as it sounds. To jack up salaries significantly in those agencies would require big adjustments to those budgets. And once it's done, it raises the question of why we aren't making National Institutes of Health salaries competitive with top hospitals? What about CIA agents and corporate espionage? I think it would be great if that Pandora's Box got opened, and we had a serious conversation about government compensation, the pay gap, and societal values. I would love it. But to say, let's raise salaries for some smart people who we need right now totally ignores the realities of federal pay, and how compensation is out of whack up and down the pay scale.