The five following are the principal circumstances which, so far as I have been able to observe, make up for a small pecuniary gain in some employments, and counterbalance a great one in others: first, the agreeableness or disagreeableness of the employments themselves; secondly, the easiness and cheapness, or the difficulty and expense of learning them; thirdly, the constancy or inconstancy of employment in them; fourthly, the small or great trust which must be reposed in those who exercise them; and, fifthly, the probability or improbability of success in them.
-- Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, "Chapter 10: Of Wages and Profit in the different Employments of Labour and Stock"
Information and skill aren't rewarded of themselves, for much the same reason that information wants to be free. If the skills themselve are both rare and valuable, that tends to change, effectively serving as a type of rent (in the economic sense). Effort in aquisition, risk in employment, trust, and the underlying attractiveness of the activity, all factor in.
Smith's analysis doesn't hold in all cases, but is a good first approximation. It's remarkably poorly known, even among market advocates.
There's almost certainly a book or two in there, to do it justice.
Tackling the latter: I recall listening to a BBC interview of a banker, probably in the wake of the 2007-8 global financial crisis, though the example's really an evergreen. The presenter asked how the executive justified his (it was a he) income. He responded based on value creation. Oddly, that's not a basis for compensation in a competitive market -- price should be set equal to marginal cost. Of course, if bank-executive services are a form of rent, he might be correct, but that's an interesting argument on its own.
It was a few years later when I finally got to actually reading Smith that I came across his "five following" discussion. Which a true market-capitalist banker really ought to have fully internalised. It made the interview response all the more curious.
I've also kept this in mind as other discussions of wages (particuarly concerning the tech world, but also other worker classifications) come up.
On the "information wants to be free" comment: skill itself is (in parts) an informational good, though one that lacks inforation's fundamental fungibility (we can transfer information from storage device to storage device across channels and networks, less so skills).
But like information, skill is difficult to both assert and assess. Beyond zero marginal costs, a chief reason information markets behave so poorly is that it's hard to assert high-quality information, and expensive to assess it. If you're reading a book, or article, or ... lengthy and/or cryptic HN comment ... somewhere in your head is the question "is this even worth my time?"
This is what makes tech recruiting, from both sides of the table, such a PITA. The front-line people writing ads and screening calls ... have all but no capability to assess skills. Responses are all over the map, from the absolutely unqualified to domain specialists and experts. "Expertise" itself is almost certainly a misnomer as so much information has so short a half-life -- it's generalised problem-solving and learning which are most required. And the tasks and projects to which talent is applied can itself be called into question. Take the 737 MAX development -- Boeing almost certainly would have been better for not trying to drag out the lifespan of that airframe, a decision which likely should have been made in the mid-1990s. Full costs (or benefits) of decisions cannot be known when they're made, and only manifest over years, decades, or even centuries (fossil fuel use).
The notion of "manifest vs. latent" properties or consequences is one I've been looking at. Some earlier work by Robert K. Merton and others.
"The market" rewards short-term, highly-apparent, risk-externalising, liquidity-generating behaviours. There are inherent distortions to all of this. Skills and competence (as well as skills development, mentoring, training, preservation, etc.) are poorly served.
There's also some interesting discussion relating to this in Alvin Toffler's Future Shock, from 1970, which I'm reading for the first time. Bits drag, but there is much that's prescient.
You make some very interesting points. The Adam Smith quote points out the various axes to consider when looking at the "viability" of something in the market which is quite correct. But there is another wrinkle added by the "Modern" world. I presume you are aware of the works of Nassim Taleb. He makes a distinction between "Extremistan" and "Mediocristan" (and lambasts Economics and Economists :-) which i feel is very applicable to understanding "The Market". With the current "Information/Data" revolutions the frequency and impact of "Extremistan" events have increased dramatically and existing economic models are no longer sufficient to explain them. For example, what exactly is the "marginal cost" of software? How do we explain the rise of "The Internet" as a major economic driver? I lean towards the viewpoint that this dichotomy is applicable to the whole Software/IT industry. Thus "Embedded Systems Industry" has moved from "Extremistan" to "Mediocristan" (commoditization, cost reduction, large supply pool etc.) while "Web Development" is still in "Extremistan" and this gets reflected in their respective salaries.
Thanks for the extremistan/mediocristan reference. I've read some Taleb, but not much and not deeply, and that's a valid point.
Financialisation and capital accumulation allow tremendous inequalities in allocation. These have always been present to some degree, but recent history (say, 1800 - present) seems exceptional. Note that arguably the Gilded Age personal fortunes were probably even more extreme than those of today.
Unless I'm missing something, the marginal cost of software publishing is very near zero. Development is ... more expensive.
The Internet's role is a whole 'nother discussion, but pulling in a notion of an ontology of technological mechanisms (see: https://ello.co/dredmorbius/post/klsjjjzzl9plqxz-ms8nww), it's a network, with network effects, as well as a system. These ... tend to define general parameters and considerations.
Where specific industries fall on the mediocristan / extremistan scale .... is an interesting question. Though I'd argue that systems/networks elements tend toward extremistan. Whether hardware is/isn't systems/network (as I'm using the terms) is another question.
For successful fundamental component manufacturers (e.g., Intel, AMD), hardware certainly resembles extremistan.
-- Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, "Chapter 10: Of Wages and Profit in the different Employments of Labour and Stock"
https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_I/...
Information and skill aren't rewarded of themselves, for much the same reason that information wants to be free. If the skills themselve are both rare and valuable, that tends to change, effectively serving as a type of rent (in the economic sense). Effort in aquisition, risk in employment, trust, and the underlying attractiveness of the activity, all factor in.
Smith's analysis doesn't hold in all cases, but is a good first approximation. It's remarkably poorly known, even among market advocates.