BOOK REVIEW / CURRENT ISSUES : We All End Up Paying the Price for Overpaid Executives : THE COST OF TALENT: How Executives and Professionals Are Paid and How It Affects America <i> by Derek Bok</i> ; Free Press, $24.95, 333 pages

Talk about inflation--between 1970 and 1990, the number of people in the United States reporting adjusted gross incomes of more than a million dollars increased by nearly 9,500%, from 642 to 60,677.

Some would see that growth as a sign of a rapidly expanding economy, or proof that the American dream is still alive, but it’s probably more accurate to read the surge as an indication that the much-celebrated free market is often nothing of the kind.

Leon Hirsch, awarded $118 million in 1991 as chairman of U.S. Surgical Corp., may actually believe “I’m not paid enough” (so he told Time magazine last year), but would any executive earn anywhere near that sum in a truly free market, which presumes that an executive’s contributions to a company can be accurately calculated?

Not likely; if that were true, many executives in recent years--at GM, IBM and Sears, to name just three--would have been paid a minuscule fraction of their million-dollar salaries.

“In Search of Excess,” by UC Berkeley business professor and reformed compensation consultant Graef Crystal, is to date the definitive work on executive salaries.

“The Cost of Talent,” by former Harvard president and law professor Derek Bok, is a worthy successor to that volume--in substance if not in style, because Bok’s writing, in stark contrast to Crystal’s, is wooden. Bok also throws his net wider, considering the compensation not only of corporate executives but also that of doctors, lawyers, professors, teachers and government officials.

His conclusion? That executives and professionals in the United States, when their salaries are compared to their peers in advanced countries around the world, “are probably paid at least twice or three times the amount required to attract able people and motivate them to do their best.”

Bok’s interest in compensation grew out of his concern that the enormous salaries offered top-notch law students in the 1980s was an ominous sign for the nation as a whole.

As he said at the time, the huge percentage of Rhodes scholars going on to law school represented a “massive diversion of exceptional talent into pursuits that often add little to the growth of the economy, the pursuit of culture, or the enhancement of the human spirit.”

That idea is muted in “The Cost of Talent,” despite the double meaning in its title, with Bok getting bogged down in salary trends over the past two decades and having to reiterate his points for each of the six professions discussed. Still, Bok’s central argument is convincing: that you don’t have to overpay to persuade exceptionally talented people to fill difficult, responsible positions.

Bok’s argument, moreover, passes the common-sense test: Anyone who insists that he or she should receive, say, $3 million rather than $1 million for doing a job has already demonstrated more interest in accumulating money than performing work.

Bok, unfortunately, doesn’t discuss in any detail the demoralizing effect that enormous salaries have upon the culture as a whole. The United States is a democracy in theory and a meritocracy in aspiration, but even the most naive teen-ager knows that wealth provides special access to, and thus influence over, the political process. (Did anyone say “Ross Perot”?)

Excessive salaries, in short, breed cynicism, causing people to devalue professions that don’t pay particularly well--farming and teaching, for example--while overvaluing those that do.

Worse, people make such judgments despite knowing that high salaries are frequently undeserved--in executive circles, because compensation is set by dependent, self-dealing corporate committees, and in many of the professions, because specialized knowledge has created virtually unregulated monopolies.

Bok considers a number of remedies for the distortions caused by excessive compensation but rejects most of them--such as merit pay--as unworkable.

And he is undoubtedly right to say that a more progressive tax structure is in order, one that puts a heavier burden on the super-rich.

I have my own modest proposal, however: create a model of influence in the U.S.--influence over politics, culture, the environment, world affairs--and pay people inversely to the power they wield.

Under this system, the average social worker would earn perhaps $50,000, the average journalist maybe $20,000, and Bill Clinton and Michael Eisner, God bless ‘em, nothing. Somehow, I don’t think either Clinton or Eisner would quit--or even Leon Hirsch, for that matter.

As it is, Hirsch should be giving back much of his 1991 salary to U.S. Surgical, the company having recently projected losses for four straight quarters and its stock trading at about 25% of its 365-day high.