We know that people’s frus­tra­tions run deep­er than these most recent polit­i­cal bat­tles. … They expe­ri­ence in a very per­son­al way the relent­less, decades-long trend. … And that is a dan­ger­ous and grow­ing inequal­i­ty and lack of upward mobil­i­ty that has jeop­ar­dized mid­dle-class America’s basic bar­gain — that if you work hard, you have a chance to get ahead. .I believe this is the defin­ing chal­lenge of our time: mak­ing sure our econ­o­my works for every work­ing Amer­i­can. It’s why I ran for Pres­i­dent. It was at the cen­ter of last year’s cam­paign. It dri­ves every­thing I do in this office. — Pres­i­dent Obama

Eco­nom­ic inequal­i­ty is a polit­i­cal­ly potent issue.  Van­der­bilt Uni­ver­si­ty pro­fes­sor Lar­ry Bar­tels believes that it was a crit­i­cal one in the 2012 Pres­i­den­tial race, adding 2 to 3 per­cent­age points to Pres­i­dent Oba­ma’s share of the vote and 1 per­cent in bat­tle­ground states.  The Pres­i­den­t’s advan­tage on this issue, Bar­tels says, was large­ly sym­bol­ic, hav­ing more to do with the per­cep­tion that his oppo­nen­t’s great wealth had detached him from the con­cerns of ordi­nary vot­ers. Peo­ple moti­vat­ed to vote for the Pres­i­dent because of this issue did so more because of who they believed Mitt Rom­ney was than because of what the Pres­i­dent pro­posed to do.

That’s under­stand­able because his pro­pos­als, as recit­ed again in his Decem­ber 4 speech on inequal­i­ty, don’t amount to much.  The prob­lem is more eas­i­ly defined than resolved. It was bad when the Pres­i­dent took office near­ly five years ago. It is worse today.  It has grown despite high­er tax­es on the most pro­duc­tive indi­vid­u­als and small firms, mas­sive expan­sions of gov­ern­ment assis­tance pro­grams, the cre­ation of a new enti­tle­ment to health insur­ance, and a pre­vi­ous increase in the min­i­mum wage. Were the pro­pos­als out­lined in the President’s Decem­ber 4 speech enact­ed, the prob­lem would almost cer­tain­ly con­tin­ue to worsen.

The one thing you can say about the President’s ideas is that while they are inef­fec­tu­al, they are not as bad as they could be. Some of the worst ideas call for the gov­ern­ment to use the blunt instru­ments of tax­a­tion and reg­u­la­tion to seek to enforce a par­tic­u­lar vision of fairness.

One such idea is to impose a max­i­mum wage, gen­er­al­ly set as a ratio of CEO pay to that of employ­ees on the low­est rung of the cor­po­rate lad­der. The Swiss deci­sive­ly vot­ed down a 12:1 ratio in a ref­er­en­dum held late last month, reject­ing the propo­si­tion 65–35.  The propo­si­tion failed to gar­ner a major­i­ty in any of the country’s cantons.

The case for the gov­ern­ment impos­ing what is, in effect, a max­i­mum wage is almost entire­ly emo­tion­al and impres­sion­is­tic. Its advo­cates note that exec­u­tive com­pen­sa­tion is much high­er today than it was in the 1980s and that it has out­paced growth in both aver­age wages and stock prices. That’s true, but it does not mean that CEO pay is excessive.

Argu­ments against the ref­er­en­dum also weren’t ter­ri­bly com­pelling, rely­ing most­ly on the obser­va­tion that com­pa­nies could avoid the caps by out­sourc­ing low­er-pay­ing jobs or mov­ing cor­po­rate head­quar­ters out of Switzer­land. While some com­pa­nies might do that, it does not fol­low that com­pen­sa­tion lim­its are illegitimate.

The most impor­tant ques­tions are the most dif­fi­cult to answer: what is a CEO worth and who should make that deter­mi­na­tion? The answer to the first ques­tion is: it depends. How much was Steve Jobs worth to Apple or Hen­ry Ford to Ford Motor Com­pa­ny? With­out them, their respec­tive com­pa­nies would nev­er have exist­ed, jobs would nev­er have been cre­at­ed, share­hold­ers would not have derived wealth, con­sumers would not have enjoyed inno­v­a­tive and afford­able products.

One could jus­ti­fy almost any lev­el of com­pen­sa­tion for a Jobs or a Ford. It is much hard­er to assess the val­ue of a CEO who assumes the helm of an estab­lished com­pa­ny. Does he or she real­ly make it more pro­duc­tive and valu­able?  If so, by how much?

Com­pa­ny per­for­mance is baked into the pay of most exec­u­tives, much of whose com­pen­sa­tion comes in the form of stock options. If the com­pa­ny does well, exec­u­tive com­pen­sa­tion ris­es. If poor­ly, it falls. This chart, pre­pared by the Eco­nom­ic Pol­i­cy Insti­tute, traces both the rise in the ratio of CEO-to-work­er pay in the US and its decline after 2000, espe­cial­ly after the 2008 finan­cial meltdown.

Some will look at this chart and see CEO pay as “exces­sive”; oth­ers will say that it shows how the mar­ket cor­rects itself over time, with the ratio drop­ping by almost half in the course of a decade. It is entire­ly pos­si­ble that it is work­ing its way toward an appro­pri­ate level.

Which returns us to the crit­i­cal ques­tion of who should decide the “right” amount of CEO pay. Some argue that the gov­ern­ment should sim­ply set a lim­it, gen­er­al­ly expressed as a ratio of exec­u­tive pay to some­one else’s com­pen­sa­tion – whether the pay of an aver­age work­er, the low­est-paid work­er, or the fed­er­al min­i­mum wage. This pre­sup­pos­es that the gov­ern­ment knows the pre­cise (or at least the max­i­mum) val­ue of a CEO for every com­pa­ny — regard­less of indus­try, how it fares rel­a­tive to com­peti­tors, and whether or not it is profitable.

Such pre­ci­sion wouldn’t work well in fields where val­ue is more eas­i­ly deter­mined. Should George Clooney’s com­pen­sa­tion, for exam­ple, be lim­it­ed to 12 times the pay of a pro­duc­tion assis­tant? LeBron James’s salary be teth­ered to that of one of the team’s ball boys? Judge Judy’s to her make­up artist?

One could counter that cal­cu­lat­ing the worth of ath­letes and celebri­ties is more straight­for­ward than cal­cu­lat­ing that of a CEO. Many would argue Judge Judy is over­paid, giv­en her annu­al salary of $47 mil­lion. Then again, her pro­gram gen­er­ates $200 mil­lion in annu­al rev­enue, but only costs $10 mil­lion a year to pro­duce. One could argue that she is underpaid.

Agents for Clooney and LeBron have respec­tive­ly per­suad­ed Hol­ly­wood investors and the own­ers of the Mia­mi Heat that they are worth an awful lot of mon­ey (though, at least in LeBron’s case, less than Judge Judy).

The cal­cu­la­tion of a CEO’s worth is much more com­pli­cat­ed and sub­tle, which sug­gests to me, at least, that it is absurd to sub­ject it to an arbi­trary lim­it. Some are undoubt­ed­ly over­paid and it is cer­tain­ly pos­si­ble that all of them are. But the peo­ple who are in the best posi­tion to make that judg­ment are those most famil­iar with a company’s per­for­mance: its board.

That’s not a ter­ri­bly sat­is­fy­ing result for peo­ple look­ing to vent their resent­ments against those who have pros­pered in a slug­gish econ­o­my. These resent­ments run deep and are polit­i­cal­ly potent, which is why the Pres­i­dent fre­quent­ly returns to the inequal­i­ty theme. The prob­lem is that he hasn’t for­mu­lat­ed cogent pro­pos­als to reme­di­ate it.

He is not alone. Repub­li­cans have gen­er­al­ly declined to con­front the issue head-on, while those on the Left, both here and abroad, have embraced a series of sim­plis­tic and ham-hand­ed pro­pos­als that lash out against wealthy peo­ple with­out iden­ti­fy­ing, much less address­ing, the caus­es of grow­ing inequal­i­ty. Gov­ern­ment should tax their income more heav­i­ly, lim­it their pay, con­fis­cate por­tions of their wealth, sav­ings and invest­ments.

These pro­pos­als won’t grow the econ­o­my or raise liv­ing stan­dards, reduce pover­ty or increase eco­nom­ic mobil­i­ty. They are all cud­gel and club, hav­ing the char­ac­ter and val­ue of emo­tion­al out­bursts, vent­ing frus­tra­tion and reliev­ing resent­ments, mak­ing a point with­out mak­ing a difference.

That isn’t meant to dis­miss or min­i­mize the prob­lem of inequal­i­ty. It is only to say that it is a prob­lem that demands bet­ter analy­sis and more robust and nuanced solu­tions than have so far emerged.