Referring to the following article, please give your thoughts and to what extant do you agree or disagree

President Obama's tongue-lashing of Wall Street executives this week has broken the dam for a long simmering resentment of executive compensation among the American public. As the debate on that topic continues in the media and at water coolers, it may be interesting to learn what economists have to say about it.

Readers will not be surprised that, with very few exceptions, economists defend current executive compensation in the United States with an appeal to supply and demand. A good illustration of that defense is offered by the Cornell University economist Robert H. Frank in his recent Op-Ed column in The New York Times, "Should Congress Put a Cap on Executive Pay?" That column is well worth reading to get a fair and full flavor of the economist's argument.

Whether or not compensation is fair depends on how you think about an employee's contributions to the company. Let's take it in two steps.

First is the idea that an investor-owned corporation is socially responsible for maximizing the wealth of the firm's owners without violating the laws of the land — period. For practical purposes, "owners' wealth" is defined as the firm's "market capitalization" or "equity value," measured by the price per share of the firm's common stock times the number of common shares the firm has issued.

Second is the idea of how much an employee should be worth to a company, given this mandate for increasing the wealth of the firm's owners.

Economists model a firm's demand for a prospective employee with a given skill set as the maximum compensation that firm would be willing to pay for that employee. That maximum bid price should be the amount by which the prospective employee's work for the firm would be expected to add to the wealth of the firm's owners, other things being equal, but prior to deducting that employee's own compensation. A higher compensation obviously would impoverish the owners. (The clause "other things being equal" — usually expressed by economists by the Latin "ceteris paribus" — protects the analysis against the possibility "other things" besides the employee's productivity may drive stock prices over any period.)

For example, if prior to deducting a prospective employee's compensation, the firm expects that employee to add, say, $90,000 to the owners' wealth, ceteris paribus, then the absolute maximum the firm could pay that employee without impoverishing the firm's owners would be $90,000.

The firm's theoretical maximum bid price, however, is not usually what the firm actually has to pay the prospective employee, if many potential workers with the required skill set would be willing to work for the firm at a lower compensation. Thus enters supply into the analysis.

Now, to apply this demand-supply framework to an understanding of executive compensation in the real world, economists go on to make two crucial assumptions.

First, they subscribe to the Lone Ranger theory of management that is so popular in an adulating financial press.

According to that theory, a firm's chief executive is the main determinant of a firm's market "capitalization." The economist Mr. Frank, for example, illustrates the application of the theory when he writes that "Louis V. Gerstner Jr., having produced record earnings at RJR Nabisco, was hired by I.B.M., where he led the computer giant, then struggling, to a dramatic turnaround in the 1990s." Evidently, in the mind of economists, Lone Ranger C.E.O.'s can make truly astronomical contributions to a firm's market capitalization, ceteris paribus, which justifies high bid prices for them. Why Lone Ranger C.E.O.'s who have trashed their firm's market capitalization should be sent off to pasture with hundred-million-dollar golden parachutes — which occurs with remarkable frequency — seems to be not much analyzed by economists. Perhaps other things did not remain equal.

The second crucial assumption in the economist's narrative is that the supply of talented executives is strictly limited, even in this country, which has a large corps of highly educated people further trained in famous business schools.

To illustrate this point, Mr. Frank argues that the market for executive talent is highly competitive, that the decisions for hiring C.E.O.'s are based on "well-researched predictions" about each candidate's potential economic contribution to the firm, but that "the problem is that although every company wants a talented chief executive, there are only so many to go around."

As a general proposition, of course, that argument may be no more valid than the idea that the supply of potential gold-medal winners at the Olympics is roughly equal to the number of athletes who actually won gold medals. But economists rest their case on it.

Using this theory, economists working at the empirical level have found what they believe to be a justification for the recent growth of executive compensation. In his column, Mr. Frank cites a 2006 study by the economists Xavier Gabi and Augustine Lander in which they argue that the compensation of C.E.O.'s should vary directly with the market capitalization of the company. They then report that the market capitalization of large companies in the United States grew sixfold between 1980 and 2003, as did the compensation of their C.E.O.'s.

Readers may wonder about the survival of this theory, even among economists, as stock prices have begun to tumble sharply, starting in 2007.

Readers may also wonder why, in the United States, the ratio of total executive compensation (including bonuses and deferred compensation, pensions and perks) to the comparable figure earned by non-management employees rose from 50 in 1980 to 301 by 2003 for the 300 to 400 largest corporations (and to 500 in very large corporations), while that ratio typically has remained so much lower in Europe and in Asia. Are corporate executives in Europe and Asia so vastly inferior to their American counterparts, or is the supply of potential C.E.O.'s so much larger there as to drive down the ratio in, say, Japan, to as low a 3?

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