Thinking at the Margin: It's Revolutionary(cafehayek.com)
cafehayek.com
Thinking at the Margin: It's Revolutionary
http://cafehayek.com/2016/09/thinking-at-the-margin-its-revolutionary.html
70 comments
Well here is a very interesting analysis that concludes better teachers show very little if any statistical differences in the outcomes of their students: http://slatestarcodex.com/2016/05/19/teachers-much-more-than... It really doesn't matter that the teachers in the US are slightly worse, because teachers don't really matter.
>What's more, compared to the public school systems of other developed countries, the US one is far from the best and one of the worst in math.
These are based on average scores and don't control for race or income. If I recall correctly, if you do control for other factors, similar looking students tend to do about the same between the US and Europe.
>What's more, compared to the public school systems of other developed countries, the US one is far from the best and one of the worst in math.
These are based on average scores and don't control for race or income. If I recall correctly, if you do control for other factors, similar looking students tend to do about the same between the US and Europe.
You're right to point this out, although cs702's point still stands that the letter erroneously implies that the prices in the labor market for education indicates something about the quality of the supply.
You're equating a ranking with an absolute scale on a dimension that's only loosely correlated. The last-ranked shot-putter on the Olympic awards pedestal (bronze) is still a really good shot-putter.
It would be one level removed, then, to judge someone to be a bad log-bearer because they're only the 5000th-best shot-putter.
IOW: low ranked in school does not imply "bad teacher". I means, among the people rated as having sufficient mastery of the material, they were the lowest; that's not the same as "poor at achieving educational objectives", and it's not the same as "unqualified in absolute terms".
Edit: Though, in fairness, he probably should have said "good-enough" rather than "superb".
It would be one level removed, then, to judge someone to be a bad log-bearer because they're only the 5000th-best shot-putter.
IOW: low ranked in school does not imply "bad teacher". I means, among the people rated as having sufficient mastery of the material, they were the lowest; that's not the same as "poor at achieving educational objectives", and it's not the same as "unqualified in absolute terms".
Edit: Though, in fairness, he probably should have said "good-enough" rather than "superb".
Yeah, I think that line is a pretty clear indication of why such arguments and the economic theory that prompts them are out of touch with reality.
I would say that in reality, there certainly is a much larger supply of people that are considered to be suitable for performing these jobs. However, that they are considered to be 'suitable' for performing these jobs does not mean they are actually capable of performing these jobs well, let alone that those selected are the most 'superb' of the candidates.
I can think of at least the following reasons:
* those determining whether someone is suitable for a job take into account how much they are going to (have to) pay someone. If there is a large supply of people that consider themselves suitable, then those selling themselves cheaper have a better change of getting the job, even if they are less capable. Pay is easy to measure, skill is hard to measure, so pay becomes the easy yardstick to use.
* those doing the hiring do not usually have sufficient knowledge of the skills necessary to perform a job. You underestimate work you're not actually doing, used if you used to do the work just a few years ago.
* related to the first: when hiring people, their job-related skills are not as important as how well you like them, the impression they make on you, etc. People are irrational and most interviews are decided based on things entirely separate from someone's capabilities.
So of course teachers are not as good as they could be: many people more capable would only become teachers if teachers earned more, if they would be recognized as capable or if they were better at interviewing.
Corollary: jobs are generally performed by those only just capable of performing them or by those underselling themselves relative to their capabilities. The latter possibly because they have some sort of passion or appreciation for the job independent of monetary reward or because some form of inertia keeps them there. In some sense a version of The Peter principle.
I think such reasoning explains our observations much better than what the OP offers.
Another corollary: if you like your job or are good at it, you can earn more somewhere in a job you don't like and are just capable of performing.
I would say that in reality, there certainly is a much larger supply of people that are considered to be suitable for performing these jobs. However, that they are considered to be 'suitable' for performing these jobs does not mean they are actually capable of performing these jobs well, let alone that those selected are the most 'superb' of the candidates.
I can think of at least the following reasons:
* those determining whether someone is suitable for a job take into account how much they are going to (have to) pay someone. If there is a large supply of people that consider themselves suitable, then those selling themselves cheaper have a better change of getting the job, even if they are less capable. Pay is easy to measure, skill is hard to measure, so pay becomes the easy yardstick to use.
* those doing the hiring do not usually have sufficient knowledge of the skills necessary to perform a job. You underestimate work you're not actually doing, used if you used to do the work just a few years ago.
* related to the first: when hiring people, their job-related skills are not as important as how well you like them, the impression they make on you, etc. People are irrational and most interviews are decided based on things entirely separate from someone's capabilities.
So of course teachers are not as good as they could be: many people more capable would only become teachers if teachers earned more, if they would be recognized as capable or if they were better at interviewing.
Corollary: jobs are generally performed by those only just capable of performing them or by those underselling themselves relative to their capabilities. The latter possibly because they have some sort of passion or appreciation for the job independent of monetary reward or because some form of inertia keeps them there. In some sense a version of The Peter principle.
I think such reasoning explains our observations much better than what the OP offers.
Another corollary: if you like your job or are good at it, you can earn more somewhere in a job you don't like and are just capable of performing.
If the top athletes were never born then there would be still be pro sports using other athletes almost as good, and people would still talk about how skilled they are and how they are the best in the world. Similarly for acting and music. These are winner-take-all professions. Being the best is not about reaching an absolute level of skill; it's relative to the rest of the population.
And that's leaving aside the randomness involved in which songs become a hit. If you have positive feedback (the famous become more famous) then the system is not designed to necessarily pick the best. It's just designed to pick someone. You have a filter where any difference will work and if there isn't a difference a boy band will be chosen at random. So the same structure can happen even if unlike sports, skill is hard to measure.
On the other hand there are skills that are easy to measure (who is the fastest worker in an Amazon warehouse) that don't matter as far as pay is concerned. But if we had televised box-moving competitions and they were popular then there's no reason in principle it couldn't be made to matter.
And that's leaving aside the randomness involved in which songs become a hit. If you have positive feedback (the famous become more famous) then the system is not designed to necessarily pick the best. It's just designed to pick someone. You have a filter where any difference will work and if there isn't a difference a boy band will be chosen at random. So the same structure can happen even if unlike sports, skill is hard to measure.
On the other hand there are skills that are easy to measure (who is the fastest worker in an Amazon warehouse) that don't matter as far as pay is concerned. But if we had televised box-moving competitions and they were popular then there's no reason in principle it couldn't be made to matter.
IMO, it's the gap in still not the absolute skill levels that are most interesting. Michael Jordan was not just the best player of his generation he was dramatically better than other players. Remove the top 100 players and these gaps shrink dramatically. Collage sports is interesting in part because the smaller pool of people and large number of teams makes for even wider skill gaps.
Rule changes have made the NFL more competitive, but overall the sport is less interesting without unusually good teams.
Rule changes have made the NFL more competitive, but overall the sport is less interesting without unusually good teams.
Yes, agreed. From an entertainment point of view, if the NFL didn't exist people would watch some other sport and find that just as interesting (maybe for different reasons). The skill level isn't essential to the entertainment value.
To clarify, Michael Jordan was a huge net gain to the NFL well beyond his pay. The Bulls flat out made more money with him on the roster than he cost which is all you need to sport his salary. He also made the sport more popular. At the same time while the average NFL team in 2015 would crush the average NFL team from 1970, but that does not mean the 2015 NFL is more interesting.
So, I accept the salaries as a local optimum, but finding a cheaper option is probably very hard. Perhaps retire players after 5-10 years?
So, I accept the salaries as a local optimum, but finding a cheaper option is probably very hard. Perhaps retire players after 5-10 years?
It is wrong to compare Tom Brady to teachers in general. Instead you should compare athletes in general to teachers in general. Or compare best in class athletes to best in class teachers.
The general comparison would compare minor league baseball or local club soccer players to your kids kindergarten teacher. You might find that the teacher comes out on top.
The best in class comparison is harder. There are only 32? Nfl teams therefore there is enormous competition for the 32 best quarterbacks (maybe more including backups). If you are the #200 quarterback on the planet no one cares. Those selection dynamics don't happen for teachers. There might be some elite tutors who are highly sought out by wealthy parents, but not with the same intensity as quarterbacks.
This is compounded by the fact that sports skill is more easily measured than teaching skill. We might debate if Tom Brady is better than Peyton Manning, but it is obvious both are in the top ten in the world. Not so with teachers. Some are clearly better, but the clarity of ranking you can get with sports performance is impossible is any measure of teaching performance.
The general comparison would compare minor league baseball or local club soccer players to your kids kindergarten teacher. You might find that the teacher comes out on top.
The best in class comparison is harder. There are only 32? Nfl teams therefore there is enormous competition for the 32 best quarterbacks (maybe more including backups). If you are the #200 quarterback on the planet no one cares. Those selection dynamics don't happen for teachers. There might be some elite tutors who are highly sought out by wealthy parents, but not with the same intensity as quarterbacks.
This is compounded by the fact that sports skill is more easily measured than teaching skill. We might debate if Tom Brady is better than Peyton Manning, but it is obvious both are in the top ten in the world. Not so with teachers. Some are clearly better, but the clarity of ranking you can get with sports performance is impossible is any measure of teaching performance.
Yeah, I would have expected that a domain called "Cafe Hayek" and a post title of "Thinking at the Margin: It's Revolutionary" would have noticed that it's not a supply-side surplus that drives down these wages, but a complex interaction of how the demand-side works.
First off, we have the layers of oligopolization, like you've said: carefully marketed and individuated products for sports, film, and music ensure that there's a substantial profit margin there. It's not that there aren't indie films or small sports teams; it's that these companies have convinced people that this is their team and that their identity is mixed in with it, just the way that my girlfriend drinks Diet Coke and not pop.
Teaching is simultaneously much more cutthroat, with tons of schools that are constantly shifting composition and competing for the same slice of some dearth of public funds which first gets siphoned off by the occasionally-corrupt bureaucrats at the top, superintendents and such, who don't have nearly the accountability that the teachers do. Then there is a competition among the teachers, ameliorated somewhat by unions, but there is also a competition between the unions too. All of this ensures that there's money to spare for the pop cultures that's not there for the educational infrastructure. UNTIL... you get to colleges, where there are some colleges which have distinct identities; I still name-drop my undergraduate work at Cornell rather than my Master's at the TU Delft, even though the latter is a much greater achievement. There's a bit more pie around for the professors, and they enjoy much more cushy arrangements like tenure.
If you average over athletes in general, athletes get paid crap. Most of them are teenagers playing in exchange for being taken out for pizza afterwards; then there are adult amateurs and college-level play... You take the typical inner-city basketball player and evaluate his chances of making it to stardom, you're going to be talking about winning the lottery. Even if he has big dreams. Same with actors. But what you're actually seeing in these celebrities is a carefully-played oligopoly causing a great demand for a scarce product, and the scarcity drives these commitments to finding the best-of-the-best that allows stars to leverage that monopoly that all of us have in a free society, our monopoly on our own labor.
First off, we have the layers of oligopolization, like you've said: carefully marketed and individuated products for sports, film, and music ensure that there's a substantial profit margin there. It's not that there aren't indie films or small sports teams; it's that these companies have convinced people that this is their team and that their identity is mixed in with it, just the way that my girlfriend drinks Diet Coke and not pop.
Teaching is simultaneously much more cutthroat, with tons of schools that are constantly shifting composition and competing for the same slice of some dearth of public funds which first gets siphoned off by the occasionally-corrupt bureaucrats at the top, superintendents and such, who don't have nearly the accountability that the teachers do. Then there is a competition among the teachers, ameliorated somewhat by unions, but there is also a competition between the unions too. All of this ensures that there's money to spare for the pop cultures that's not there for the educational infrastructure. UNTIL... you get to colleges, where there are some colleges which have distinct identities; I still name-drop my undergraduate work at Cornell rather than my Master's at the TU Delft, even though the latter is a much greater achievement. There's a bit more pie around for the professors, and they enjoy much more cushy arrangements like tenure.
If you average over athletes in general, athletes get paid crap. Most of them are teenagers playing in exchange for being taken out for pizza afterwards; then there are adult amateurs and college-level play... You take the typical inner-city basketball player and evaluate his chances of making it to stardom, you're going to be talking about winning the lottery. Even if he has big dreams. Same with actors. But what you're actually seeing in these celebrities is a carefully-played oligopoly causing a great demand for a scarce product, and the scarcity drives these commitments to finding the best-of-the-best that allows stars to leverage that monopoly that all of us have in a free society, our monopoly on our own labor.
Did you just say that teaching is much more cutthroat than professional sports, music, and film? I'm trying to imagine the aspiring teaching doing late-night lectures in smoky bars for free, or teaching at the local teacher's club (again for free) so that one day they might reach their dream of being a professional teacher.
One day teaching might be cutthroat if we can ever figure out how to create some competition, but the only throat cutting that's happening is over internal politics, which is table stakes for any career worth pursuing.
One day teaching might be cutthroat if we can ever figure out how to create some competition, but the only throat cutting that's happening is over internal politics, which is table stakes for any career worth pursuing.
I mean, yes. I'm evaluating the teaching industry as a whole as being more competitive than the sports industry. I think you're mistaking different measures of competition, though, and we're possibly talking about the same thing in exactly opposite terms.
To get us back on the same page: Entering a new field is best thought of as a graph of how much you've been paid overall (the integral of your wages) minus job-related costs (student loans etc.) over time. Probably this time-axis is not "real time" but "time invested," as you may well be working for tips while trying to "break into" either teaching or acting. Now, there is some graph overlaid, which represents the amount you could have made doing other stuff (again in integral form, total profit you could have expected to make by that time pursuing other avenues). This is called an "opportunity cost" and often subtracted off of the original graph in some circles but I prefer to plot them side-by-side. In any case, find the t-position where these two graphs first cross and that (time, profit-to-date) break-even point is the "barrier to entry" into a new field. By the mean value theorem, sometime before you hit that point, the slope of your new career will have the slope of your old one, which is probably the definitive time when you "became a teacher" or "became an actor," rather than simply aspiring and doing stuff-on-the-side to break into the field. And sharper concavity on the curves suggests that this is closer or further from the break-even point.
OK, now that we've got the same picture in our heads: you're either measuring "cutthroatness" as either the time to become a teacher or that total break-even profit, and then you come to a natural conclusion that teaching, being a more gradual path to the point and having a lower point, is less cut-throat of a profession. I totally get that, and it's pretty persuasive.
However, what's salient for the economic theory is competitiveness for people who are already in the relevant industry. And that is where we cross terms, either inexactly (if you meant the first one) or exactly the reverse (if you meant the second one).
In standard macroeconomic theory, the magnitude of that break-even (profit, time) is the major factor determining how competitive the field is for the people who have already made it: a huge break-even investment means that the actors who have made it are going to make better wages.
One easy way to see this is to imagine a profession with no barriers to entry at all, something which anyone can just decide to go and do. (The stereotype of "fry cook" comes to mind.) In the long run, those are necessarily the least profitable professions, because anyone in a less-profitable profession will effortlessly switch to those professions, which will dilute profit in those professions and concentrate profit in the professions they're leaving, tending to equilibrate the two. Barriers to entry, whether those of copyright and patents or that of needing to fight for years to be recognized for your acting prowess, are the only things stopping the unwashed masses from coming in and making sport of it; it stands to reason that the bigger the barriers, the more of them are stopped.
In that sense, teaching is much more cutthroat than acting or sports or being a doctor; once you've made it as an actor/actress or an athlete or a doctor, you're now in the industry and therefore you're getting paid well, even if it cost you a lot to get in. You can enjoy a healthy security now that you've made it, precisely because it was so hard to make it, and everyone else needs to climb that mountain, too.
But if you're a teacher, your chance of having your school close or getting fired -- erm, "not asked to return" -- the next year is much higher, and you (a) know it and (b) often don't have the safety margin to easily afford it. You are much more replaceable than a professional athlete, therefore you have much less negotiating power at the table.
To get us back on the same page: Entering a new field is best thought of as a graph of how much you've been paid overall (the integral of your wages) minus job-related costs (student loans etc.) over time. Probably this time-axis is not "real time" but "time invested," as you may well be working for tips while trying to "break into" either teaching or acting. Now, there is some graph overlaid, which represents the amount you could have made doing other stuff (again in integral form, total profit you could have expected to make by that time pursuing other avenues). This is called an "opportunity cost" and often subtracted off of the original graph in some circles but I prefer to plot them side-by-side. In any case, find the t-position where these two graphs first cross and that (time, profit-to-date) break-even point is the "barrier to entry" into a new field. By the mean value theorem, sometime before you hit that point, the slope of your new career will have the slope of your old one, which is probably the definitive time when you "became a teacher" or "became an actor," rather than simply aspiring and doing stuff-on-the-side to break into the field. And sharper concavity on the curves suggests that this is closer or further from the break-even point.
OK, now that we've got the same picture in our heads: you're either measuring "cutthroatness" as either the time to become a teacher or that total break-even profit, and then you come to a natural conclusion that teaching, being a more gradual path to the point and having a lower point, is less cut-throat of a profession. I totally get that, and it's pretty persuasive.
However, what's salient for the economic theory is competitiveness for people who are already in the relevant industry. And that is where we cross terms, either inexactly (if you meant the first one) or exactly the reverse (if you meant the second one).
In standard macroeconomic theory, the magnitude of that break-even (profit, time) is the major factor determining how competitive the field is for the people who have already made it: a huge break-even investment means that the actors who have made it are going to make better wages.
One easy way to see this is to imagine a profession with no barriers to entry at all, something which anyone can just decide to go and do. (The stereotype of "fry cook" comes to mind.) In the long run, those are necessarily the least profitable professions, because anyone in a less-profitable profession will effortlessly switch to those professions, which will dilute profit in those professions and concentrate profit in the professions they're leaving, tending to equilibrate the two. Barriers to entry, whether those of copyright and patents or that of needing to fight for years to be recognized for your acting prowess, are the only things stopping the unwashed masses from coming in and making sport of it; it stands to reason that the bigger the barriers, the more of them are stopped.
In that sense, teaching is much more cutthroat than acting or sports or being a doctor; once you've made it as an actor/actress or an athlete or a doctor, you're now in the industry and therefore you're getting paid well, even if it cost you a lot to get in. You can enjoy a healthy security now that you've made it, precisely because it was so hard to make it, and everyone else needs to climb that mountain, too.
But if you're a teacher, your chance of having your school close or getting fired -- erm, "not asked to return" -- the next year is much higher, and you (a) know it and (b) often don't have the safety margin to easily afford it. You are much more replaceable than a professional athlete, therefore you have much less negotiating power at the table.
Where are the best in class teachers?
Are they hiding among the teachers in general? If they can't be identified, there is no effective & material differentiation (read: no justification for higher compensation) among them vs the less skilled.
Are you saying that the best teachers, in principle, could be measured, but we haven't developed the methods to do so (to be sure, a real possibility)? Or are they simply 'better' a-priori/intrinsically regardless if we can measure it or not?
The best in class athletes to best in class teachers comparison either fails or finds athletes winning flat out.
Are they hiding among the teachers in general? If they can't be identified, there is no effective & material differentiation (read: no justification for higher compensation) among them vs the less skilled.
Are you saying that the best teachers, in principle, could be measured, but we haven't developed the methods to do so (to be sure, a real possibility)? Or are they simply 'better' a-priori/intrinsically regardless if we can measure it or not?
The best in class athletes to best in class teachers comparison either fails or finds athletes winning flat out.
Probably the most substantial difference is iteration. A footballer gets many games per year with many moments per game to potentially shine or fail publicly, with stats that can be evaluated year after year. Your success as a teacher can somewhat be evaluated via testing, but that seldom tracks something close to what you're really supposed to be doing: making a difference in your kids' lives. At best that's an evaluation that has to be made by the now-grown child themselves, several years after the interactions which occurred.
I'm saying that it is harder to measure and that the measurement is inherently noisier for teachers. We measure teachers by how their students perform on standardized tests, which has all sorts of problems.
The more important factor is the value placed on differential performance. A 10% difference in teacher performance is lost in the noise. It likely wouldn't mean more money even if it could be measured easily. Whereas a 10% difference in football might mean being #1 in the draft versus going undrafted.
The more important factor is the value placed on differential performance. A 10% difference in teacher performance is lost in the noise. It likely wouldn't mean more money even if it could be measured easily. Whereas a 10% difference in football might mean being #1 in the draft versus going undrafted.
Private schools, international schools (if multi-lingual), private tutoring.
Exactly. It doesn't make sense to compare the top individual of one ability's distribution to the average individual of another. There's a world of difference between a top football player and the average football player. I'd expect ability to be distributed along a power law, just like wages are.
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... so, to summarize: If something is truly important to society, then one should want to ensure that lots of people are doing it, and that supply ensures that they will all not get paid highly.
Am I the only one who finds it perverse that this is regarded a "successfull economy"?
Am I the only one who finds it perverse that this is regarded a "successfull economy"?
I wasn't under the impression that we have an over-supply of nurses, firefighters and teachers. More a supply shortage of skilled personnel in either branch because the pay is too low.
It's a feedback loop - the better the pay is, the more people are after it, which lowers the pay, and so forth. This loop tends to be more disrupted in highly regulated fields (like healthcare), but there are other factors too. For instance, in my country, an important reason for the shortage of doctors and nurses is simply that they can find a better pay and more humane working conditions abroad, and so they emigrate.
Except that in advanced economies most people are not primarily motivated by potential future income when "choosing" their profession, an many people do not consider it much at all (just look at people choosing to study literature instead of business admin). Some might say future income is their main motivation but are just irrationally motivating a choice done on some other basis (the starving artist dreaming of making it big).
Even in more traditional economies, the son of a smith "chooses" to be a smith more out of filial duty than because its a job he has good potential to earn money with. Another reason is that he is too poor to change profession, and so does not change it despite there being a more lucrative opportunities.
Even in more traditional economies, the son of a smith "chooses" to be a smith more out of filial duty than because its a job he has good potential to earn money with. Another reason is that he is too poor to change profession, and so does not change it despite there being a more lucrative opportunities.
Nurses are a bad example - they make crazy good money and are unionized.
In some countries that aren't in Europe? (well, they are unionised too)
Yes. I have several friends who are nurses, all of whom made around $100k right out of nursing school (more or less depending on proximity to a large city). Here's their union: http://www.nationalnursesunited.org/site/entry/california-nu...
(in california)
(in california)
Another way of phrasing it would be: it ensures that things which are truly important to society are available at low prices.
Either way, the corollary still is that roughly, the more a job is paid, the less value to society it provides. There are exceptions of course, but I find it to be a pretty decent heuristic.
Either way, the corollary still is that roughly, the more a job is paid, the less value to society it provides. There are exceptions of course, but I find it to be a pretty decent heuristic.
Such an educated man might go a step further than just answering the question, and rephrasing it... Maybe it's not just about earning more money, but disproportionately higher standard of living. And speaking about those inequalities shifts the debate - since they earn so much money, they could contribute more to society, say through taxes ?
Could not agree more. I can't shake the feeling that he's being hand-wavey on purpose, essentially saying that nothing needs to change because, you see, supply and demand...
This is the general libertarian economist's retort to any suggestion that things might be better if they were different in my experience and it is uninteresting as it is evasive and unsatisfactory.
There are lots and lots of great actors and football players in the world. We only watch the best of the best, so they get a disproportionate amount of wealth and fame. You can't broadcast an image of the best firefighter and replace the jobs of other firefighters, like you can broadcast a movie and replace acting jobs.
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He got the economics all wrong. There's no shortage of people that can play sports well (at a comparable level to the average teacher or firefighter). It's more about the network effect of fans and the marginal value added (think about the value of the Cavs before/after Lebron James).
A better point would have been about how the total dollars spent on teachers and firefighters is many times the total spent on athlete's salaries.
A better point would have been about how the total dollars spent on teachers and firefighters is many times the total spent on athlete's salaries.
The main issue is not about pay on its own. It's about what that pay gets you. First responders and teachers deserve pay that allows them to live comfortably (not necessarily luxuriously) in the neighborhoods they serve.
If you use the word "deserve" you're probably no longer talking about economics.
That's asinine. Economics is "the branch of knowledge concerned with the production, consumption, and transfer of wealth." (some dictionary favoured by Google). Thinking about what kinds of transfers of wealth and what allocations of resources are the most "fair" or "just" is what economics has always done.
Just because one answer is "there is no discoverable fair or just allocation possible, and avoiding trying will have the best outcome", does not mean that answer gets to claim the entire discipline and any dissent is no longer "economics".
Just because one answer is "there is no discoverable fair or just allocation possible, and avoiding trying will have the best outcome", does not mean that answer gets to claim the entire discipline and any dissent is no longer "economics".
This is actually one of the first things that my econ classes covered: normative vs positive statements.
Proper and correct economic analysis explicitly concerns itself with positive statements. These are statements that are factual and/or scientific. In this case, it would be things like estimating the maximum life times earnings of the average athlete. You can gather the data, develop a model, and crunch the numbers to test the model.
The flip side are normative statements: i.e. how things ought to be, what values should be upheld, etc. At that point you are more properly concerned with philosophy, specifically morality, than purely economics. You can certainly use economic data, economic terms, economic models, etc in making your case, but ultimately you are arguing for a normative statement (e.g. what is a "just" or "fair" allocation?).
That's not to say that economists don't make normative statements, they do and all too often. But that's usually politics.
Proper and correct economic analysis explicitly concerns itself with positive statements. These are statements that are factual and/or scientific. In this case, it would be things like estimating the maximum life times earnings of the average athlete. You can gather the data, develop a model, and crunch the numbers to test the model.
The flip side are normative statements: i.e. how things ought to be, what values should be upheld, etc. At that point you are more properly concerned with philosophy, specifically morality, than purely economics. You can certainly use economic data, economic terms, economic models, etc in making your case, but ultimately you are arguing for a normative statement (e.g. what is a "just" or "fair" allocation?).
That's not to say that economists don't make normative statements, they do and all too often. But that's usually politics.
The logical positivist school of economics is one branch, and dominated the field for a time. It is far from the complete story though.
Logical positivism is a school of philosophy. It certainly impacted the view of what constituted scientific analysis in the realm of economics. I'm more talking about the development of economics as a science, rather than a branch of politics or philosophy.
It is inextricably linked to social (and therefore normative) values however, that's why it sits firmly as a social science and not a hard one.
Everything about economics is a normative value judgment. It is in fact a normative value judgment to claim it is a 'science' more akin to physics than philosophy -- this gives a faux-neutral, faux-objective validity to a field which should not have it. The metrics economists choose to use, the usually horrifyingly incorrect assumptions (rational consumers, competition, efficiency, etc) they make in order to get to a place where they can apply some mathematical theory -- all normative judgments central to the field, just made implicit.
Everything about economics is a normative value judgment. It is in fact a normative value judgment to claim it is a 'science' more akin to physics than philosophy -- this gives a faux-neutral, faux-objective validity to a field which should not have it. The metrics economists choose to use, the usually horrifyingly incorrect assumptions (rational consumers, competition, efficiency, etc) they make in order to get to a place where they can apply some mathematical theory -- all normative judgments central to the field, just made implicit.
Economics as a discipline can certainly be positive and scientific. Developing a model to predict the elasticity of demand, collecting the data, testing the model, and independently replicating the results is certainly science, with all the pitfalls of doing science well.
Answering whether one should raise/lower the price of some product P to maximize profit for company C is a normative question.
BTW, calling economics a social science doesn't mean that economics gets to shun scientific methods, nor is economics any less a science than physics. Being a social science just means that the discipline will apply scientific methods to develop models of, collect data about, or directly experiment on human subjects. (Physicists, and normal humans alike, don't view individual particles as human and feel no qualms about performing whatever experiments they might feel like, no matter how high energy.)
Humans tend to be understandably nervous about being test subjects and this has limited the pace-of and extent-of progress that economists have been able to make. The extent to which economics relies on inaccurate models ("rational consumers, competition, efficiency" as you say), is the extent to which personal morals, governments, and societies inhibit progress.
One thing I find very cool about economics is that it can put bounds on how much these barriers to our scientific understanding cost and benefit us. There is a cost to having a better model than "rational consumers" and we can know how much that is. But whether or not one ought to pay that cost is outside the realm of economics.
Overall, I think your claim is more rightly applied not to Economics the discipline but to Economists the practitioners.
Answering whether one should raise/lower the price of some product P to maximize profit for company C is a normative question.
BTW, calling economics a social science doesn't mean that economics gets to shun scientific methods, nor is economics any less a science than physics. Being a social science just means that the discipline will apply scientific methods to develop models of, collect data about, or directly experiment on human subjects. (Physicists, and normal humans alike, don't view individual particles as human and feel no qualms about performing whatever experiments they might feel like, no matter how high energy.)
Humans tend to be understandably nervous about being test subjects and this has limited the pace-of and extent-of progress that economists have been able to make. The extent to which economics relies on inaccurate models ("rational consumers, competition, efficiency" as you say), is the extent to which personal morals, governments, and societies inhibit progress.
One thing I find very cool about economics is that it can put bounds on how much these barriers to our scientific understanding cost and benefit us. There is a cost to having a better model than "rational consumers" and we can know how much that is. But whether or not one ought to pay that cost is outside the realm of economics.
Overall, I think your claim is more rightly applied not to Economics the discipline but to Economists the practitioners.
And yet humans, collectively, pay what they feel they should (or if they don't value it the market disappears). You can't talk about economics without also considering what people want and what they believe and how that affects what they pay.
Otherwise how can you explain that educators in Finland are held in higher regard, paid more, and are required to be more accomplished?
Otherwise how can you explain that educators in Finland are held in higher regard, paid more, and are required to be more accomplished?
That's not nearly ambitious enough - everyone deserves to live a comfortable life, and we as an industrialized society have enough physical resources to do so.
Alternative objection: the "in the neighborhoods they serve" sounds like a zoning and housing development issue, not a pay issue. Why are you trying to shovel more money at rent-seeking behavior that pushes up the price of housing?
Alternative objection: the "in the neighborhoods they serve" sounds like a zoning and housing development issue, not a pay issue. Why are you trying to shovel more money at rent-seeking behavior that pushes up the price of housing?
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Terrible understanding of labor economics. Football players and firefighters are not static populations, they are also subject to labor forces; people choose to enter jobs based on the quality of the job and the pay. Heck, Tom Brady would probably make an excellent firefighter, if that's where the money was!
We aren't blessed with a surplus of superb teachers; we pay smart people more to work on Wall Street than teach, and so end up with an army of underqualified teachers. If we needed football players in every city, we'd pay them less, too, and they'd be mediocre. The amount of jobs available for firefighters is always high because you need them, and it's that which leads to their lower salaries, and in turn mediocrity. Hayek economics is terrible with externalities; if this post were accurate, we'd never have a shortage of firefighters.
We aren't blessed with a surplus of superb teachers; we pay smart people more to work on Wall Street than teach, and so end up with an army of underqualified teachers. If we needed football players in every city, we'd pay them less, too, and they'd be mediocre. The amount of jobs available for firefighters is always high because you need them, and it's that which leads to their lower salaries, and in turn mediocrity. Hayek economics is terrible with externalities; if this post were accurate, we'd never have a shortage of firefighters.
If higher pay generated athletes that were more entertaining to watch competing, there would be more substance here. Trouble is, competition is most of what is entertaining, less so the athleticism. There is something unnecessary about the rewards to the peaks of athletics.
Some people have won a popular lottery where their genetics combined with their determination adds up to a reward - popular because of the demand for the body type in some competition - while the same effort without the same genetics will have a less rewarding result. There's nothing intrinsically fair or even socially desirable in a society / economy that pays a large bonus here.
It's better the athletes get it than get nothing of course, because youth doesn't last forever. But perhaps the degree of power law is too much.
Some people have won a popular lottery where their genetics combined with their determination adds up to a reward - popular because of the demand for the body type in some competition - while the same effort without the same genetics will have a less rewarding result. There's nothing intrinsically fair or even socially desirable in a society / economy that pays a large bonus here.
It's better the athletes get it than get nothing of course, because youth doesn't last forever. But perhaps the degree of power law is too much.
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Excellent. Notice also this solves the problem of outragious CEO pay. If we figure the marginal value of the CEO as how much more the company would earn if it added another CEO, its at best zero, because the company only needs 1 CEO. Two CEOs would probably just fight with each other so much it would harm the company.
Therefore, CEOs should be paid at most nothing at all, because their marignal value is at best zero.
Of course, CEOs which have big egos and are therefore more likely to be in conflict with an additional CEO, of course, have negative marginal value, and therefore should actually pay the company for the opportunity to be its CEO.
Free Market Capitalism can solve ANYTHING!!!!!!
Therefore, CEOs should be paid at most nothing at all, because their marignal value is at best zero.
Of course, CEOs which have big egos and are therefore more likely to be in conflict with an additional CEO, of course, have negative marginal value, and therefore should actually pay the company for the opportunity to be its CEO.
Free Market Capitalism can solve ANYTHING!!!!!!
> The lower pay of fire fighters and school teachers simply reflects the happy reality that we’re blessed with a much larger supply of superb first-responders and educators
I was joking a while back saying "free market" in US is like a religion. Someone pointed out American Civil Religion as a phenomenon: https://en.wikipedia.org/wiki/American_civil_religion . I guess it mostly overlaps with Libertarian-ism but but I think it can be identified separately.
It basically means we solve problems not thinking about the direct solution: how to fight fires, how to teach children better, how do we not let people go into medical bankruptcy. Instead, we always answer "how will this make the Free Market God happy?" If it doesn't we don't do it.
In this case it is "Teachers are at the bottom of the ladder for desirable jobs after college? That's fine, move along". This is what make free market happy, it is clearly decided for us.
Same with people going bankrupt because they went to a hospital for a night. Nationalizing medical care would incur the wrath of FMG. So to appease it we jump through complicated hoops with Medicare, Medicaid, shuffle money around between insurers, hospitals, doctors in a complicated and hard to track way.
> George Mason University, Fairfax, VA
Ok, that makes sense.
I was joking a while back saying "free market" in US is like a religion. Someone pointed out American Civil Religion as a phenomenon: https://en.wikipedia.org/wiki/American_civil_religion . I guess it mostly overlaps with Libertarian-ism but but I think it can be identified separately.
It basically means we solve problems not thinking about the direct solution: how to fight fires, how to teach children better, how do we not let people go into medical bankruptcy. Instead, we always answer "how will this make the Free Market God happy?" If it doesn't we don't do it.
In this case it is "Teachers are at the bottom of the ladder for desirable jobs after college? That's fine, move along". This is what make free market happy, it is clearly decided for us.
Same with people going bankrupt because they went to a hospital for a night. Nationalizing medical care would incur the wrath of FMG. So to appease it we jump through complicated hoops with Medicare, Medicaid, shuffle money around between insurers, hospitals, doctors in a complicated and hard to track way.
> George Mason University, Fairfax, VA
Ok, that makes sense.
The Mercatus center at GMU is nothing more but a think tank for right wing shills who will do anything to promote the status quo and supply-side economics. These people have no integrity or value as economists.
It is sponsored by the Koch brothers btw.
It is sponsored by the Koch brothers btw.
This argument is way too simplistic and not generalizable. For example, doctors get paid very well, and are also very important to society. The answer must be more nuanced than: important jobs have a lot more supply, therefore the demand for them is cheap.
Personally, I believe the pay of a profession has little to do with the profession itself, and more to do with the system that surrounds the profession. There is not just the economics of supply and demand for the profession, but also at every level of the system.
For example, doctors and police offers both save lives. It's unclear to me why doctors would make 8x the salary of a police officer. However, doctors require 10 more years of schooling and long hours of practice in the early years. This is part of the system of early education that surrounds the profession. But the interesting thing is I feel most of these requirements are unnecessary and are more vestiges of an evolution of the market that define them. Doctors don't need to work such long hours in residency if we only accepted more residents. But that would lower the salary of doctors. That's one supply/demand system. Also the ridiculous educational requirements of "pre-med" is mostly a deterrent to stop more people from becoming doctors. The only reason to go through the suffering is to have the opportunity of a high salary. If the salary was low, no one would do it. Another supply demand system.
There are many economic "markets" along the way to a profession, that have little to do with the profession itself, but have a lot to do with computing the salary of the profession. Ultimately you'd think the markets would "equilibrate" to a just one. But is seems there are many "unfair" equilibria.
Personally, I believe the pay of a profession has little to do with the profession itself, and more to do with the system that surrounds the profession. There is not just the economics of supply and demand for the profession, but also at every level of the system.
For example, doctors and police offers both save lives. It's unclear to me why doctors would make 8x the salary of a police officer. However, doctors require 10 more years of schooling and long hours of practice in the early years. This is part of the system of early education that surrounds the profession. But the interesting thing is I feel most of these requirements are unnecessary and are more vestiges of an evolution of the market that define them. Doctors don't need to work such long hours in residency if we only accepted more residents. But that would lower the salary of doctors. That's one supply/demand system. Also the ridiculous educational requirements of "pre-med" is mostly a deterrent to stop more people from becoming doctors. The only reason to go through the suffering is to have the opportunity of a high salary. If the salary was low, no one would do it. Another supply demand system.
There are many economic "markets" along the way to a profession, that have little to do with the profession itself, but have a lot to do with computing the salary of the profession. Ultimately you'd think the markets would "equilibrate" to a just one. But is seems there are many "unfair" equilibria.
exactly. pediatric neurosurgeons for example make a lot. same for oncologists , and unlike athletes they have long careers
What an astonishingly stupid and self-indulgently ignorant response.
The premise - that talent in sport is rare, and talent in socially useful services is plentiful - is nonsense.
Why don't we have phenomenal super-teachers and super-firemen? Is it because they don't exist? Are there really no incredibly talented individuals who can not only super-teach but also teach others how to super-teach?
Or is it because there's no process to find and reward them?
If it's the latter - why does that process not exist?
The answer isn't "Because there's no social demand for it." Education isn't exactly outstanding in the US, and super-teachers would do a lot to help the country's economic prospects.
But that doesn't happen for a simple reason: there's no easy way to make a short-term profit from them.
Profitability of socially valuable services is diffuse and long-term, and spread over the economy as a whole instead of being owned by a few individuals.
"Talented" sports people and actors follow the opposite pattern. They're selected and valued because they can be farmed for quick profit. This happens to correlate - to some extent - with special talent.
But in fact the number of sports business and movie studios is strictly limited. So it's actually quite likely that for every super-talent, there's a non-trivial number of individuals with similar talents who are never found and selected - precisely because it's more profitable to artificially limit their number to create the illusion of product scarcity.
There's nothing inherently wrong with a profit-driven economy. But when the economy becomes driven by short-term profitability, because its predictive horizon is too narrow to model the future accurately, good things stop happening.
The premise - that talent in sport is rare, and talent in socially useful services is plentiful - is nonsense.
Why don't we have phenomenal super-teachers and super-firemen? Is it because they don't exist? Are there really no incredibly talented individuals who can not only super-teach but also teach others how to super-teach?
Or is it because there's no process to find and reward them?
If it's the latter - why does that process not exist?
The answer isn't "Because there's no social demand for it." Education isn't exactly outstanding in the US, and super-teachers would do a lot to help the country's economic prospects.
But that doesn't happen for a simple reason: there's no easy way to make a short-term profit from them.
Profitability of socially valuable services is diffuse and long-term, and spread over the economy as a whole instead of being owned by a few individuals.
"Talented" sports people and actors follow the opposite pattern. They're selected and valued because they can be farmed for quick profit. This happens to correlate - to some extent - with special talent.
But in fact the number of sports business and movie studios is strictly limited. So it's actually quite likely that for every super-talent, there's a non-trivial number of individuals with similar talents who are never found and selected - precisely because it's more profitable to artificially limit their number to create the illusion of product scarcity.
There's nothing inherently wrong with a profit-driven economy. But when the economy becomes driven by short-term profitability, because its predictive horizon is too narrow to model the future accurately, good things stop happening.
There are so many misconceptions about pay
'Altheltes' and 'actors' are not homogeneous. Most actors and pre-pro athletes make significantly less than their pro counterparts.
Pro athlete pay, with the exception of top stars, is not as lucrative as it may seem. Careers tend to be short due to injuries and other factors, so while athlete may earn a lot when they play, they may only play a few years. A solid 6-figure job that pays for many decades will earn more moeny in the end.
The pension for pro athletes is not that great either. And then there are the injuries , which the leagues tend to do a poor job of covering. Many players struggle with expenses due to heath issues but also poor money management and short careers.
Firefighters and teachers may not make much salary (at least compared to a pro athlete) but their careers are much longer and they get very good pensions.
You just have to put things in perceptive.
'Altheltes' and 'actors' are not homogeneous. Most actors and pre-pro athletes make significantly less than their pro counterparts.
Pro athlete pay, with the exception of top stars, is not as lucrative as it may seem. Careers tend to be short due to injuries and other factors, so while athlete may earn a lot when they play, they may only play a few years. A solid 6-figure job that pays for many decades will earn more moeny in the end.
The pension for pro athletes is not that great either. And then there are the injuries , which the leagues tend to do a poor job of covering. Many players struggle with expenses due to heath issues but also poor money management and short careers.
Firefighters and teachers may not make much salary (at least compared to a pro athlete) but their careers are much longer and they get very good pensions.
You just have to put things in perceptive.
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The point the article is trying to refute doesn't stand, teachers and first responders actually make more money than most athletes and actors.
I happen to know lot of ex-pro athletes, who are really good but didn't quite make it big, or just in a less rewarding field (like swimming), and lots of musicians who have trained in their art for their whole lives.
Even the very best violinists, sans a few in the world who happen to be famous, are only making comfortable middle class income. There is a joke in the classical musician world :"Real musicians have day jobs."
And for the athletes, most make nothing, especially in North America where there is no semi-pro clubs and leagues.
I happen to know lot of ex-pro athletes, who are really good but didn't quite make it big, or just in a less rewarding field (like swimming), and lots of musicians who have trained in their art for their whole lives.
Even the very best violinists, sans a few in the world who happen to be famous, are only making comfortable middle class income. There is a joke in the classical musician world :"Real musicians have day jobs."
And for the athletes, most make nothing, especially in North America where there is no semi-pro clubs and leagues.
A nice idea, and I want to agree with it. Unfortunately, teachers and firefighters are employed by the state, which means they're not going to go out of business if they're out-competed by superior workers. So there's no incentive to pay more to get better workers, they can just pay the minimum necessary to employ almost anyone to do the job.
We are extraordinarily fortunate to have so many superb minimum wage fast-food workers. Their lower pay simply reflects the happy reality that we're blessed with a much larger supply of them.
If you have better schools the district's property values go up which increases the tax base. Families can and do move across districts to access better schools, so there is competition in that sense. Same with many city services. Firefighters and teachers in Palo Alto for instance are paid well compared to other districts, the schools are some of the "best" in the nation, and property values are high as hell.
Not so for teachers, there are private schools which compete with public schools.
Similarly, there are private firefighting companies.
https://www.wildfirex.com/private-firefighting/
Similarly, there are private firefighting companies.
https://www.wildfirex.com/private-firefighting/
Yes but the state isn't going to go out of business regardless of how much better the private schools or firefighters are.
While factually true, this is disingenuous, at least in the US. Schools and firefighting services are given out for free, which severely limits the market for private alternatives.
Teaching center: https://www.youtube.com/watch?v=dkHqPFbxmOU
This "thinking" is laughably muddied and just plain wrong. Yet it's delivered by an economics professor. Strange.
Most of what athletes and actors make comes from the scale that mass media provides. Not much different than the source of internet titans' wealth.
If teachers and other public workers could achieve the same scale, they could probably earn a similar paycheck.
If teachers and other public workers could achieve the same scale, they could probably earn a similar paycheck.
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Wait, what? Who says we are blessed with a large supply of "superb" school teachers in the US?
According to McKinsey, nationwide, public school teachers in the US come from the bottom third of college graduates.[1] What's more, compared to the public school systems of other developed countries, the US one is far from the best and one of the worst in math.[2]
That's not exactly "superb."
There are countries blessed with a large supply of superb teachers, for example, Finland, where teachers come from the top 10% of college graduates. However, government intervention has apparently played a large role[3], and income inequality there is among the lowest in the EU.[4]
[1] http://www.mckinseyonsociety.com/downloads/reports/Education...
[2] https://nces.ed.gov/fastfacts/display.asp?id=1
[3] http://www.smithsonianmag.com/innovation/why-are-finlands-sc...
[4] http://www.helsinkitimes.fi/finland/finland-news/domestic/10...