Even More Econ

Mike Meginis wrestling with an invisible hand:

Most minimum wage employees are absolutely essential to our economy and quality of life, not just because we exploit them to lower prices and perform undesirable tasks but because they do jobs that need to be done. Working retail sucks, but without retail there’s no manufacture, no entertainment, nothing — so why should working retail suck? I think it’s obvious that we need janitors. We need the people who make our food. If anything, we should be offering greater incentives to do these jobs — precisely because they are essential but not enjoyable. People like me, who specialize in enjoyable but not-very-important work, should honestly be the ones with shitty wages if we’re interested in rewarding essential labor.

Absolutely right.  Not that Mike should be poor, since he’s blogging for the greater good, but the rest of it, about how we have a completely backwards understanding of just remuneration in this country.

This discussion often comes up when high school guidance counselors are trying to explain to teenagers the benefits of an education.  They do something like profile a brain surgeon and a coal miner:  $300k, golf trips, clean clothes, and most-eligible-bachelor status vs. $50k, no time off, black diseased lungs, early death via cave-in, etc., then ask who wants to be a surgeon, to unanimous acclaim (West Virginia is crying at this point).  The follow-up question is “Why are surgeons paid more?” to which the bright little teachers’ pet in the front row replies: because they have more years of school, because their job is more valuable to society, because not everyone can do what they do, because there wouldn’t be any surgeons if they were paid less.

Most of these are true to a degree — a) the years of school required are a barrier to entry for those without the resources to sustain themselves in the short-term, b) medical fields do select for those with above-average abilities to remember large amounts of information and sleep very little, and c) if surgeons were paid less, more would probably move to other specialties, or into other fields (thing hedge fund trader) that were heavily rewards.

However, these are all just the incidental reasons that surgeons have more power than coal miners and are thus able to extort more payment for their services.  The only moral argument that surgeons deserve more compensation — that what they do is more valuable to society — is also the one that’s clearly false.  No where else in the economy is social benefit explicitly rewarded, and it is far from clear that surgeons even are more beneficial that energy industry workers (e.g. coal miners), who are essential to many essential services (including hospitals!).

If we want to have a moral economic system, that rewards effort and sacrifice, rather than power, then we need to start looking at something like this.

2 comments to Even More Econ

  • If I were a more contrarian and zealous free market champion (like, say, Milton Friedman), I’d argue that the wage problem is the result of too little market freedom and not too much. The certification process for doctors (medical school) is an unnecessary impediment that simply jacks up the wages of doctors without adding social utility. An open market for doctors could provide the same service (using reputations as a guide to good and bad doctors) and their wages would reflect the cost of inputs of their service–not the effort expended acquiring certification which sets an artificial level for wages. Thus, doctors’ wages would be closer to coal miners and coal miners would pay less to see doctors, making them wealthier.

    But I am not that contrarian.

  • Thank god for your lack of contrarian-ness, or my post might have gotten smacked around a little bit.

    Of course the problem is that if there was perfect information as those neo-classical “contrarians” stipulate, and reputation stood in for certification, successful doctorhood would still require extensive schooling and above-average abilities, and surgeons’ power would not have decreased one bit, so they would still be paid handsomely.

    It’s only if we lift regulation and consider doctors in reality — where no one have a clue as to their quality — that we could suppose wages would go down. Of course the downsides of not being able to ensure your surgeons quality are both obvious and terrible.

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