Saturday, March 21, 2009

Arnold Kling on fundamental attribution errors

Two of my favourite economic bloggers, Mark Thoma and Arnold Kling, have referred to my earlier post on Andrew Leigh and Mark McLeish's paper on fundamental attribution errors in economic performance. Arnold Kling provides a pointer to a related piece he wrote in 2003. While the entire piece is well worth reading, the following section had a certain resonance

The economic attribution error means that people assign too much credit or blame for economic performance to the President and other officials. But shouldn't the President be held accountable, just as a corporate CEO is held accountable for corporate performance?

... I believe that we commit attribution errors in our evaluation of corporate CEO's.

... If CEO's really make enough of a difference to merit their centerfold spreads in business magazines, then they are badly underpaid. On the other hand, if context plays the dominant role in determining corporate profitability, then CEO pay is biased upward by the attribution error. I suspect the latter.

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