On teachers and hedge fund managers

Today we had a talk from Michael Sandel who opposed the "tyranny of meritocracy" based on money and success with the recognition of the common good--even if hard to define!

With one of his examples, it reminded me of a question that I have heard (and raised myself) many times: why is it that hedge fund managers are paid MUCH more than kindergarten teachers?  The answer of why they should NOT be paid more is clear: a great kindergarten teachers contributes much more to the common good and to the construction of future good societies than a hedge fund manager.

Here a few answers that try to justify the higher income and why I think they do not work:

1. It is about merit: hedge fund managers make a more significant contribution by helping financial markets work and send the right signals.  Since financial markets are the blood of any economy, then they are being paid by their more significant contribution.

This explanation is simply a joke after 2008.  It may be true that finance when supporting production is vital, but what about speculation?  Is it truly contributing to the common good?  Even if it was, is it doing it hundreds of times more than a kindergarten teacher?

2. It is about supply and demand and, therefore, marginal productivity.  This is the favorite neoclassical explanation: in this case, it would imply that many people can be a good teacher (so supply of teachers is high) but few can be good hedge managers (you require sophisticated technical skills like engineering, etc).

This is, again, hard to understand.  First, there are many engineers that are poorly paid.  Second, the supply of really good teachers is not that high, and the market does not seem to know how to recognize quality.  Third, the key concept in the neoclassical theory of value is marginal productivity, which sends us back to what hedge fund managers are really doing.  Are they really being more productive than others?  In what ways?

3. Connected to the previous point, it is about risk.  Investing in the financial sector is much more risky than teaching students so the rewards also need to be higher.  Moreover, surviving that risk and the tension created requires a particular character (again, going back to merit).

Another superficially powerful explanation but rather weak in practice.  Are a lot of hedge fund managers really ending up poor?  Or do they generate enough income to sustain their operations?  And why is "risk" more important than, say, "patience"?  Anyone that has been in a classroom full of three year olds knows how hard to it is to manage them and how skillful one needs to be.

I realize I am not saying anything new, but I just want to emphasize who weak, at the end, the current value system is.  It is not only that the current level of inequality may be morally repulsive. It is that it does not have any clear justification (it is about the market is a weak social explanation) and it is actually leading to a very inefficient and poor allocation of resources.

What am I missing?  Are there other explanations?  I would love to hear from anyone who reads this and has another views.