Even if you actually do measure and agree on metrics, then the measurement can easily become the goal for those who are not intrinsically motivated. Work ethic can't be taught by dangling carrots in front of people, because acquiring the carrot becomes the goal instead of moving the cart. This can be detrimental in a highly collaborative workplace.

Having a flat, generous salary might solve this problem, because you filter out carrot hunters and get cart movers.

> I bet it works great if you have a small team, are extremely picky about hiring, and quickly fire bad hires. Otherwise it will be awful.

Finding the right people to work with is difficult regardless. The same worker can be miserable in one place and flourish in another.

This is handwaving in the extreme. Anyone involved in software development knows that a single line of code can be critical to success or failure, as can a blob of 100k LOC, so product-quantity metrics are of almost no use. The "estimate" you're talking about generally comes down to general "feelings" about who works hard, which have repeatedly been shown to be poor metrics for actual contributions.

But the underlying belief of paying someone according to their effort, is very much based on the same premise.

What I'm saying is that nobody is _really_ paid according to their effort, experience etc. because those things cannot be reasonably measured.

The typical process of determining compensation is based on negotiation and power. In some places the process is more democratized and rules based. Both of these are only to some degree related to actual effort, experience and so on. This discrepancy becomes larger the more people are involved as well.