
Thinking at the Margin: It's Revolutionary - jseliger
http://cafehayek.com/2016/09/thinking-at-the-margin-its-revolutionary.html
======
cs702
From the OP: _" 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 than we are of superb jocks and
thespians."_

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...](http://www.mckinseyonsociety.com/downloads/reports/Education/Closing_the_talent_gap.pdf)

[2]
[https://nces.ed.gov/fastfacts/display.asp?id=1](https://nces.ed.gov/fastfacts/display.asp?id=1)

[3] [http://www.smithsonianmag.com/innovation/why-are-finlands-
sc...](http://www.smithsonianmag.com/innovation/why-are-finlands-schools-
successful-49859555/)

[4] [http://www.helsinkitimes.fi/finland/finland-
news/domestic/10...](http://www.helsinkitimes.fi/finland/finland-
news/domestic/10727-finland-has-lowest-income-inequality-in-eu.html)

~~~
Houshalter
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...](http://slatestarcodex.com/2016/05/19/teachers-much-more-than-you-
wanted-to-know/) 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.

~~~
nwah1
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.

------
skybrian
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.

~~~
Retric
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.

~~~
skybrian
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.

~~~
Retric
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?

~~~
skybrian
re: "gain to the NFL" do you mean NBA? (Not that I follow sports.)

~~~
Retric
LoL, yea. Was trying to use several examples from different sports. I actually
think the NFL has probably changed more due to better physical training. But,
the NBA has also gotten dramatically better over time.

------
quantumhobbit
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.

~~~
platz
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.

~~~
drostie
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.

------
ssivark
... 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"?

~~~
creshal
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.

~~~
TeMPOraL
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.

~~~
tombone12
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.

------
kehrlann
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 ?

~~~
acobster
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...

~~~
wfo
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.

------
bluesnowmonkey
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.

------
JDDunn9
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.

------
typetypetype
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.

~~~
byron_fast
If you use the word "deserve" you're probably no longer talking about
economics.

~~~
rfrey
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".

~~~
thelittlenag
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.

~~~
rfrey
The logical positivist school of economics is one branch, and dominated the
field for a time. It is far from the complete story though.

~~~
thelittlenag
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.

~~~
wfo
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.

~~~
thelittlenag
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.

------
bbctol
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.

------
barrkel
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.

------
rahelzer
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!!!!!!

------
rdtsc
> 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](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.

~~~
antisthenes
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.

------
dmvaldman
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.

~~~
paulpauper
exactly. pediatric neurosurgeons for example make a lot. same for oncologists
, and unlike athletes they have long careers

------
TheOtherHobbes
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.

------
paulpauper
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.

------
analyst74
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.

------
jstanley
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.

~~~
vinceguidry
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/](https://www.wildfirex.com/private-firefighting/)

~~~
jstanley
Yes but the state isn't going to go out of business regardless of how much
better the private schools or firefighters are.

------
eanzenberg
Teaching center:
[https://www.youtube.com/watch?v=dkHqPFbxmOU](https://www.youtube.com/watch?v=dkHqPFbxmOU)

------
guelo
This "thinking" is laughably muddied and just plain wrong. Yet it's delivered
by an economics professor. Strange.

------
squozzer
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.

