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Monday, August 11, 2008

Athletes vs. Doctors, Which is Overpaid?

On a forum, someone said:

Football players are overpaid. Nurses are underpaid. If you could fix salaries, what jobs would be paid more?

The problem is State distortion of the market.

Lawyers are paid a lot, yet they produce nothing of tangible value. Government violence creates an artificial demand for lawyers' services. If you have a dispute with someone, the only place to take it is in a State court, and the rules and procedures require a lawyer. Lawyers intentionally arranged the court procedures to be cumbersome and complicated, so that defending yourself is impractical. State violence will then enforce the court's decision.

If there's a class of job that's "overpaid", the real problem is that the State creates an artificial demand for their services.

Contrast this with a web forum. If the site admins started acting like ****heads, then eventually someone would start a competing site. This means that the admins will behave reasonably most of the time. If you don't like my blog, you can easily stop reading and do other things.

The original example given was a football player being overpaid. I'm not sure about that. If a football player has 10M people watching their game, and the game is worth $10 to each of them, then it's easy to justify high football player salaries.

Another example given was nurses. The problem is that the healthcare system is not a free market.

A group of smart nurses can't get together and say "This hospital is mismanaged; let's start a competing hospital." State regulations make that impossible.

Further, doctors need a license from the State in order to operate. In the USA, the AMA artificially restricts the supply of doctors. This guarantees that doctors will be highly paid. That's the reason you only get to see a doctor for a few minutes; there's an artificially restricted supply of doctors.

Nurses don't have a strong union like doctors, so they're paid a lot less. It's much easier to become a nurse than a doctor. The supply of nursing licenses isn't artificially restricted like doctor licenses.

If you want to know what a job is worth, the answer is "In a free market, everyone is fairly paid." The current economic system is falsely touted as a free market. Most problems you hear about exist due to government distortions of the market.

Someone said:

I disagree. A doctor should always be paid more than a football player. A football player produces nothing tangible.

It's economy of scale. A doctor can only benefit 1 patient at a time, perhaps saving their life or dramatically improving it.

Suppose a doctor does save one life per day, and that life has an economic value of $5M. Does that mean that the doctor should be paid $5M per day? No. If it isn't that hard to train someone else to work as a doctor, then that doctor should only be paid the fair value of his labor, and not the value of saving someone's life. For difficult cases, a higher-paid specialist is justified. For routine problems, such as a broken arm or removing an appendix, high doctor salaries aren't justified.

A football player can benefit 10M or more people at once. He only has to perform once, and many people can watch. Even if it wasn't ad-supported, there are other was to pay for a football game. He doesn't save their life, but he does provide them with entertainment. He improves a lot of people's lives a little bit, which can actually be more valuable than outright saving someone's life.

To put the doctor on par with the football player, suppose the doctor invents a cure for a disease. In this case, he can save thousands or millions of lives. In this case, the doctor should get paid more than the football player. In the present, most diseases are cured by doctors who are working for corporations or universities, who claim the patent to the treatment. These doctor-researchers are paid far less than their true value.

The current economic system overpays individual doctors, because of State restrictions of the market. The current economic system dramatically underpays people who research cures for diseases. Most of the profits of an invented disease cure will go to your corporate employer. Further, the FDA and drug company insiders collude to restrict permissible medical research. If I wanted to perform medical research on my own, I can't do it without a State license. In the present, most "disease cures" are really drugs that mask the symptoms without curing the underlying problem. This is the most profitable method of disease treatment, because the patient is then dependent on the drug for the rest of their life. Stem cell research has the potential to genuinely cure many diseases, and for this reason it is banned. Stem cell research, if successful, will wreck the drug companies' business model of creating drug dependency. It's really like the "Laughing man" in Ghost in the Shell!

State distortion of the market means that doctors who invent cures for diseases are paid FAR LESS than the true value of the work. In turn, this means that the State artificially restricts the rate of medical research progress.

The key difference is: Are you helping just one person at a time, or a whole bunch of people at the same time? If you're only helping one person at a time, there's a limit to how much you can get paid. If you help a bunch of people at once, then very large salaries are justified.

Let's give a specific number. A doctor saves someone's life, which is worth $5M (assigning an arbitrary finite value to someone's life). In practice, it would vary. Saving the life of someone who's only 20 is much more valuable than saving the life of someone who's 80. (If someone is suffering, severely incapacitated, and can only survive with extensive medical treatment, prolonging their life may have negative value, but that's another moral issue.)

If someone says "A person's life has infinite value", that's pro-State trolling. A person's life always has a finite value. Of course, you should *NOT* intentionally injure someone else. However, when someone is injured, the damages are finite and not infinite. When someone is healed, the benefit is finite and not infinite, even if the patient would be willing to pay all their assets for a cure.

A football player provides 2 hours of entertainment to people who watch. People watch the game willingly, so obviously they enjoy it. People would pay $10 to see a movie, so assigning a value of $10 to watching a football game makes sense. If 10M people watch the game, then that's $100M value created. People are more entertained by star players than average players, so it makes sense to distribute this profit unevenly.

If it takes 2 hours to save someone's life or 2 hours to play a football game, then it *IS* possible to justify (even in a free market), a football player getting paid more than a doctor.

Individual doctors are *OVERPAID* in the present. The government artificially limits the supply of doctors, driving up salaries. Why do doctors need a license from the government? For example, why can't insurance companies license doctors?

The key point is that in a *FREE* market, the issue of "who gets paid how much for which job" is *ALWAYS* fairly settled by the market. In the present, most careers have artificial barriers to entry. This prevents the natural salary arbitrage process from occurring.

I've invested several years in my career as a financial systems programmer. It doesn't pay for me to switch fields, even to other areas of software development! I'm branded as "someone who's only good at financial systems programming". If someone is hiring an "entry level" web developer, they'd prefer to hire someone out of college. My experience is considered useless for anything other than financial systems programming, even though it's not true. You can't say "If you don't like it, start your own business", because there's many artificial State restrictions on starting a business.

If everyone could stop lobbying the government for favors at the EXACT SAME TIME, everyone would collectively be better off. If everyone else is lobbying the government for favors and you aren't, you're SOL.

Someone else said:

Teachers are underpaid!

"Teachers are underpaid" is simultaneously true and false.

A *good* or *excellent* teacher is way underpaid. The average public school teacher is probably overpaid.


I have *NO CHOICE* but to pay teachers' salaries. If I refuse to pay property taxes (which go towards schools in the USA), then people with guns will show up and kick me out of my house. Teachers are guaranteed their salaries, even if they do a bad job. In fact, if teachers do a lousy job, that's an excuse to lobby for higher taxes and more money stolen and spent on schools.

The purpose of a public school is to create "good citizens" (slaves).

There are private schools, but they usually follow the model of a public school.

The very structure of public schools is defective. Even an excellent teacher can only do limited benefit, because the fundamental structure of schools is flawed.

In general, if a job type is guaranteed funding via government violence, then it's overpaid.


Anonymous said...

Stem cell research isn't banned. In fact, US allocates the most funds for stem cell research.

Anonymous said...

Government is involved in sports. I read a libertarian piece a while back about how we might see more competing teams/leagues in sports in a fre market.

I can't remember the link though...

but your fundamental premise is of course correct

Unknown said...

Something about your writing is seductive. Great post..I'll probably have some thoughts on this on my blog.

Anonymous said...

"Nurses don't have a strong union like doctors, so they're paid a lot less."

That would be true, except for the fact that it's illegal for doctors to unionize!

There is no doctor's union.

FSK said...

The above Anonymous commenter sure is stupid.

The AMA licensing cartel is effectively a union for doctors.

Anonymous said...

you're pretty vague on how football players improve people's life. however, i think the problem is humanity. it think the comparison in salaries is, in a round-about way, a reflection of morality.

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