At the Davos conference last month, French President Nicolas Sarkozy—no doubt wearing one of his fabulously expensive designer suits—proclaimed that the recent financial meltdown demonstrated that letting markets decide executive compensation was "morally indefensible." As he put it, "There are remuneration packages that will no longer be tolerated because they bear no relationship to merit."
But as Shikha Dalmia explains in her latest Forbes column, markets don't reward merit; they reward value—two very different things. If Sarkozy does not appreciate the difference, it's not his fault actually. Most advocates of markets have failed to fully make this distinction, perpetuating a cult of market meritocracy—something that has hindered, not helped, the cause of free markets. To rescue markets, in other words, one has to rescue them from their friends first.