In the case hiring, in a tight labor market, there are more open roles than people, so the companies that want a particular hire, or value experience in that role, need to pay more to secure the candidate. And those that don't, end up with roles that aren't filled. In a market with more labor, then the firm has its pick of candidates, and can make lower offers, secure in the fact it probably will get a bite from a candidate with fewer options.
It works that way with oil, or hog futures, or my corner bodega's sandwich prices.
(Competition between the two players in the market that have a revolving door of executives, a carefully crafted moat a mile wide, and raise prices together in lock-step but definitely do not collude, no sir!)
The difference is that the people who decide to pay the CEO so much are the ones who made the money (the company owners), it's their money to spend how they see fit. In the government it's not people spending their own money, they're spending other people's money that they obtained through the threat of jail for those who don't pay it.
There are two ways to read my comment.
One as explaining CEO salaries.
The other as actionable career advice for negotiating your own salary.
I've used this insight to nearly 5x my salary.
That salary was not minuscule to me.