Why are movie stars paid more than firefighters?

by on September 2, 2016 at 4:31 am in Economics, Education, Film | Permalink

Here’s an excellent letter from Don Boudreaux. I admit he had me at the title, Thinking At the Margin: It’s Revolutionary:

…I agree that most people are troubled that the likes of Tom Brady and Jennifer Lawrence earn far higher pay than does any firefighter or school teacher.  But this reality reflects not people’s correct understanding of a failing economy but people’s incorrect understanding of a successful economy.  It reflects also a failure of economists to better teach basic economics to the general public.  So let me ask: would you prefer to live in a world in which the number of people who can skillfully fight fires and teach children is large but the number of people who can skillfully play sports and act is very tiny, or in a world in which the number of people who can skillfully fight fires and teach children is very tiny but the number of people who can skillfully play sports and act is large?

I’m sure that you’d much prefer to live in a world in which skills at fighting fires and teaching children are more abundant than are skills at playing sports and acting.  Precisely because saving lives and teaching children are indeed far more important on the whole than is entertainment, we are extraordinarily fortunate that the numbers of our fellow human beings who possess the skills and willingness to save lives and to teach children are much greater than are the numbers who can skillfully play sports and act.

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.  Were it the other way around, then while we’d be better entertained with more top-flight sporting events and movies, all but the richest amongst us would suffer significantly greater risks of being unable to educate our children and of dying in house fires and from other mishaps.

1 Deek September 2, 2016 at 4:47 am

“we’re blessed with a much larger supply of superb first-responders”

Paging Ray Lopez.

2 Jim September 2, 2016 at 10:52 am

Make all firefighters redundant since modern buildings don’t burn anymore. Code, sprinklers, material, elec appliances, etc.

3 Mark Thorson September 2, 2016 at 11:36 am

And children can be educated over the Internet by Khan Academy, Wikipedia, etc. Why should the government be involved in education? Get those teachers off the public dole!

4 mulp September 2, 2016 at 2:39 pm

I guess news of Khan Academy is inversely proportional to the number of students getting GEDs and going directly into university without spending a day in a school, thanks to online courses???

5 mulp September 2, 2016 at 2:56 pm

Building codes have reduced fires so much in many towns fire fighters never fight a fire.

However, fire fighters are of necessity engineers, so they are employed to do emergency engineering.

How to create new doors in cars to get passengers out.
How to stabilize vehicles hanging over edge of bridges an remove passengers.
How to move people out of confined spaces.
How to neutralize chemicals.

And in NH, they have taken on drug counseling.

Of course, medical response is often added into the fire department.

But the fossil fuel burning is bringing back fire fighting. But also increasing the fluid dynamic emergency engineering.

6 Ray Lopez September 2, 2016 at 12:44 pm

Oh, hi. Another AlexT post that gets over 125 comments and counting. Amazing how good a troll AlexT is.

7 Dan Lavatan September 2, 2016 at 3:46 pm

Right, you could have one really well paid and efficient firefighter that manages a fleet of anti-fire drones and society would be as well off. Most of the large fires are wildfires, but you could argue they should be allowed to burn.

The notion the teachers help educate rather than warehouse kids is just completely wrong.

8 Jack Grahl September 2, 2016 at 4:51 am

This is a garbage argument. ‘Demand is high, therefore supply is high, therefore prices are low.’ Sorry, that’s not how supply and demand work.

9 Just an Australian September 2, 2016 at 5:02 am

+1. Surely economists can think better than this? Or are they all one dimensional?

10 Eric September 2, 2016 at 9:59 am

The argument appears shaky. Certainly the supply of athletes and actors is far in excess of firefighters and teachers. Further, far more effort has been put in practicing the former two than the latter. But while firefighters and teachers provide both necessary and local services, athletes and actors provide global entertainment value that competes for limited attention, inducing a “superstar” effect. The famous athletes and actors won the “lottery” to make it big, but 99.99% of all people who dreamed of such fame simply failed the interview.

Note that many wonder whether online teaching will create a superstar effect there.

11 JNolan September 2, 2016 at 5:21 am

Complete garbage argument. Relative skill doesn’t matter, there are only 30 starting quarterback jobs in the world that people really care about so of course they are going to be higher paid than the millions of firefighters and teachers.

12 John September 2, 2016 at 7:51 am

And why are there only 30 starting quarterback jobs? Because sports scale. A single quarterback can play to tens of thousands of people live, and millions over television. That’s ultimately why they’re paid more. The performance of actors and athletes is massively scalable while we can’t enlist a talented firefighter to put out fires all over America.

When will we have a teacher getting paid like Tom Brady? Probably when millions of students are willing to subscribe to their all-star teaching method. That may well be where we’re headed.

13 Anon September 2, 2016 at 8:02 am

+1.

14 Doug September 2, 2016 at 8:04 am
15 The Engineer September 2, 2016 at 8:39 am

Sure. With technology these days, the absolute best lecturer COULD put his absolute best lecture on any subject on YouTube, and perhaps become rich and famous through scale.

16 Deleterious September 2, 2016 at 11:45 am

What do you call a guy who won’t fart in public? A private tutor.

17 Pshrnk September 2, 2016 at 9:14 am

That’s right. ITS ALL ABOUT SCALABILITY. The rest is drivel.

18 Dave September 2, 2016 at 10:07 am

Wow you should also be a tenured GMU professor.

19 Floccina September 2, 2016 at 11:15 am

“When will we have a teacher getting paid like Tom Brady? Probably when millions of students are willing to subscribe to their all-star teaching method. That may well be where we’re headed.”

I think that there are high paid teachers, that make educational TV shows and Movies.

20 Govco September 2, 2016 at 12:53 pm

Anthony Robbins gets paid more than Brady, and way more than all the SEC, PAC 12, ACC, Big West, Canadian League QBs combined. People pay millions for short lectures from, say, Bill Clinton.

Teachers aren’t just in classrooms and football players don’t just play on Sundays.

21 emil September 2, 2016 at 8:05 am

who makes that argument?

22 Jeff R. September 2, 2016 at 9:37 am

So how do they work?

23 Daniel Weber September 2, 2016 at 9:45 am

The things essential for life are, by necessity, low skill. Otherwise humanity wouldn’t be here. If it took special skill to collect water, we’d be extinct.

On a Mars colony a farmer might be paid a million dollars a year. But anyone genetically incapable of being a farmer on Earth got filtered out during the neolithic.

24 mulp September 2, 2016 at 3:08 pm

So, after claiming most jobs are low skill, you then talk of farmers.

Why are you jumping from low skill to very high skill?

Perhaps because you have never tried to grow enough food to feed yourself for a month, much less a year.

Not even farm labor can be done by 99% of Americans due to lack of skill and apparent in ability to learn the skills given their high quit rate.

25 bluto September 2, 2016 at 3:41 pm

While most Americans aren’t specialized in farming skills, they are very easy to teach. I grew up in farm country, and spent lots of time working for farms. I have trained lots of people and every single person successfully learned the basic skills (not market pricing or weather prediction or diesel repair, but how to weed, how to harvest, how to move water, basic animal care, etc). 90+% of Americans have enough aptitude to become successful farm laborers, but the vast majority have specialized in other areas and don’t have the knowledge required at the moment.

Because anyone can learn it, and it’s not the most pleasant work, farm labor is mostly done by people who can’t specialize into other fields, either because they are minors or because they lack language skills or documentation to work in other fields.

26 Cooper September 2, 2016 at 4:44 pm

American farmers aren’t necessarily highly skilled, they just have access to lots of sophisticated machines. The tractor manufacturer is more highly skilled than the farmer just as the bus manufacturer is more highly skilled than the bus driver.

Also, you’d be hard pressed to argue that the billion peasant farmers of the world are “highly skilled”.

27 So Much For Subtlety September 2, 2016 at 4:51 am

I’m sure that you’d much prefer to live in a world in which skills at fighting fires and teaching children are more abundant than are skills at playing sports and acting.

What is the evidence that there are more people who are skilled at fighting fires and teaching children than there are that can play sports or act?

Suppose there was a plane crash and an entire Superbowl team was lost. Would anyone notice? Fans might be upset at a personal level, but another team would be found in a length of time measured in minutes and life would go on. If there was a terrorist attack at the Oscars, Hollywood would go on making pathetic reboots and ripping off cartoons, just with mildly less well known actors. I doubt the films would get any better or worse. There are probably millions of people who can act as well as any random actress called Jennifer.

What is likely to be at play is that teachers screw up an individual classroom. Three dozen children at a time. We don’t care if any one is competent. Useless firemen burn little old grannies a handful at a time at most. Again we don’t care. The losses are not so great to be worth fighting the unions and most of the victims are people far away about whom we know nothing (and needless to say, often of another skin color).

However sportsmen and actors appeal to the entire world’s population of consumers. As consumers we do not want to access the player or actor nearest us, but the one we perceive as the best in the world. Thanks to the media, we can too. So we will pay for that. That means other people will engage in a search for the people perceived to be best. They are unlikely to be the best in any meaningful sense. I think it is just a coming together of assumptions and expectations with lots of publicity, but it is close enough.

Teaching may change if it all goes on-line. Then the demand for teachers will focus on the best. Why access some third rate Community College lecturer if you can listen to someone from MIT? It is about the technology, not the skills.

(Actually the interesting one would be sex. If VR gets good enough and sex becomes a virtual activity, I would guess a third of the world’s men would be having sex with Scarlett Johansson instead of intermittent sex with their individual wives. Again it is the technology that changes a person-to-person activity into a person-to-multitude one instead)

28 Thiago Ribeiro September 2, 2016 at 5:25 am

“Suppose there was a plane crash and an entire Superbowl team was lost. Would anyone notice?”

Fair enough, but why do they command high wages then if they could be easily replaced? Aside artificially restricted supply, I can’t think of an alternative mechanism.

29 The Engineer September 2, 2016 at 8:40 am

Remember what happens every single time one of these leagues expands. The expansion teams are terrible. The overall play declines at the margin. Arguably, today’s parity in league after league has to do with the relentless expansion of these leagues over the last 20 years.

30 Thiago Ribeiro September 2, 2016 at 9:26 am

It makes sense. I don’t know much about leagues expansions, except political attempts to bring more Northern, Northeastern poor soccer teams in the national soccer cup (almost by definition those clubs are weak and can only hire the least coveted players). So you are saying there is a big difference between those who make the cut and those who don’t in American professional sports. It is an explanation. Thanks.

31 The Original D September 3, 2016 at 10:46 am

In the NFL at least parity is more a function of salary cap than expansion. Also the draft prioritizes last year’s bad teams in selection order.

32 delurking September 2, 2016 at 8:58 am

The magic of television:
People want entertainment. The cost of changing channels on the TV is near zero. Thus, those entertainers who are ever-so-slightly better than other entertainers get the vast majority of the viewers. Advertisers are willing to pay for the attention of those viewers, so a tiny advantage in entertaining ability translates to a large disparity in income.

If the top entertainer is eliminated, the next entertainer is probably very very close in quality, but will see a dramatic jump in income because changing channels is so cheap.

This also explains why Boudreaux’s argument falls flat.

33 Thiago Ribeiro September 2, 2016 at 9:33 am

At least, it feels like falling flat to me. I wonder, however. If there is only three channels (and the more restricted are the coveted spots, more attention and money must go to those who make the cut). Is the guy workingbfor the third biggest channel (and supposedly making good money) so much much better than the guy who would have a show on the fourth biggest channel (if there were such anthing), but now is just part of the reserve army of the entertainment? Why can’t this guy be used as a stick to force the third channel star to lower dramatically his demands?

34 Pshrnk September 2, 2016 at 9:24 am

They are indeed marginally better football players than their replacements. Society puts a very high value on those incremental superiorities in some activities.

35 Thiago Ribeiro September 2, 2016 at 9:36 am

But why? “All this fuss for a baseball game? Why don’t thousands come to watch a teacher inspire a child?”

36 Pshrnk September 2, 2016 at 10:41 am

“Why don’t thousands come to watch a teacher inspire a child?”

I think they do; a few at a time because it is not as easy as turning on the TV or buying a movie ticket. But if you make the teacher’s story into a movie like Lean On Me Or To Sir With Love it scales easily.

37 Thiago Ribeiro September 2, 2016 at 10:54 am

But would you go to a stadium to see it?

38 Richard September 2, 2016 at 12:41 pm

“Fair enough, but why do they command high wages then if they could be easily replaced?”

Collective bargaining. If the owners reduced the average NFL salary to $200K per year you’d still have a lot of takers and a lot of people shooting for the dream just for the fame and how cool the job is.

39 Thiago Ribeiro September 2, 2016 at 4:55 pm

“Collective bargaining.” How do they get so great outcomes? What prevents the owners to come up, at the long run, at least, with a model where they can use the less “entitled” plyers?

40 bluto September 2, 2016 at 3:49 pm

While we don’t have a plane crash, an NFL quarterback on a playoff (not even a Superbowl team) suffered a season ending injury last week. As a result of the injury Google records 200,000 stories, and the top 10 youtube videos discussion the situation have a collective 200,000 views, so it seems safe to say some people noticed.

41 Jeff R. September 2, 2016 at 9:44 am

What is the evidence that there are more people who are skilled at fighting fires and teaching children than there are that can play sports or act?

Just wait til Ben Roethlisberger gets hurt again this year and the Steelers have to put in Landry Jones. There’s your evidence.

42 Urso September 2, 2016 at 9:51 am

This is a much better argument than the one presented above.

43 (Not That) Bill O'Reilly September 2, 2016 at 10:57 am

Suppose there was a plane crash and an entire Superbowl team was lost. Would anyone notice?

The Baltimore Ravens went from being the second-best team in their conference to an afterhtough last year, and it took significantly fewer injuries than the entire team dying in a plane crash to facilitate.

The delta between the best players in a given professional sports league and the marginal replacement-level players is dramatic.

44 Lord Action September 2, 2016 at 11:02 am

Sports are designed to bring those small differences to fore. Fires really aren’t.

I know that logic doesn’t clearly apply to Hollywood, but I suppose it would shock me if most studios don’t have a regression model that tells them how much each name actor is worth.

45 So Much For Subtlety September 2, 2016 at 7:57 pm

But that happens to teams all the time. For a whole lot of reasons. Teams do have winning streaks but nowhere near as often as you might think.

You can see that talent is in fact fairly widely distributed because out of fifty Superbowls, the best team has only won six. The most any team has ever appeared in is eight. Just four teams have failed to appear in a single one.

Now that is odd is there is a genuinely small pool of talent. You would expect it to be concentrated in a very small number of teams – as with the European soccer clubs. Now the “free market” NFL does things like the draft to make sure new talent is more evenly distributed but a lot of those winning records could be put down to confidence. I would guess some of it in the past has been due to clever doctors and their chemists.

There is talent there. But I doubt it is measured well or we know what it is.

46 mulp September 2, 2016 at 3:22 pm

“(Actually the interesting one would be sex. If VR gets good enough and sex becomes a virtual activity, I would guess a third of the world’s men would be having sex with Scarlett Johansson instead of intermittent sex with their individual wives. Again it is the technology that changes a person-to-person activity into a person-to-multitude one instead)”

Sex with your wife will be affordable.

But VR sex will cost millions of dollars per session. First there is the cost of hardware. But ignoring that, the price of VR sex with Scarlett will be equal to the price of the real thing, discounted a bit to take business from her. But pricing should be based on the cost of the real alternative, as we know from epipen and other drug economics. Hardware costs are irrelevant. VR sex with hookups might be thought to be cheap, but it would be much more expensive because of the value not getting stds.

Even VR sex with your wife will be expensive because she will want enough money to hire a handyman, plumber, carpenter to do what you won’t even promise to do when all she wants if for you to hire someone, unless she bargains with sex.

47 Thor September 2, 2016 at 3:41 pm

“Sex with your wife will be affordable.”

Financially yes, but the emotional costs are taking their toll.

48 Bunker Brown September 2, 2016 at 8:29 pm

VR sex will be extremely cheap. If you don’t want to pay $1,000 for ScarJo, you can pay $500 for JLo, or $100 for Marilyn Monroe (who is of course dead but hey it’s just a simulation right), all the way down to $0.99 for the yesterday’s porn star.

Oh, what a wonderful gilded age we live in!

49 Datfreestufftho September 2, 2016 at 5:03 am

Hell yeah! Why not pay firefighters even less and quqterbacks even more? Then we will have an even better world!

50 Anon7 September 2, 2016 at 5:10 pm

There are plenty of municipalities where firefighters are overpaid with generous retirement benefits. Most firefighters are like extras on movie sets. They spend most of the day sitting around not doing very much.

51 Thiago Ribeiro September 2, 2016 at 5:05 am

So this is why Neymar makes so much money and Brazilian teachers and policemen earn so little, we are blessed with an oversupply of superb teachers and cops, but starved of soccer talent.

52 MikeP September 2, 2016 at 7:53 am

At Neymar’s unequaled level you are. Is that too difficult to understand?

53 Thiago Ribeiro September 2, 2016 at 8:08 am

“At Neymar’s unequaled level you are.”
No, we aren’t and we have an Olympic soccer gold medal to prove it. We are awesome and unbeatable as a team becajse we are awesome and unbeatable as a nation.

And talking the general case, I am not sure we are suffering with a crippling oversupply of true didatic (or medical or investigative) talent or of many other life’s good things who are cheaper (or less lavishly remunerated) than sport talent.

54 hgfalling September 2, 2016 at 9:09 am

“We are awesome and unbeatable as a team”

7-1

55 Thiago Ribeiro September 2, 2016 at 9:39 am

It was a ruse, we lured them into a false sense of security so we could unleash the blitzkrieg on them in order to get the only important soccer prize we lacked.

https://www.youtube.com/watch?v=9vybCDS-6sM

56 Deek September 2, 2016 at 9:16 am

Olympic football has no relation to a nation’s football talent. It’s a joke of a tournament. (I know you get that Thiago, but others might not realise your sarcasm.)

Brazil is starved of football talent, that’s why despite Brazilians being self-proclaimed football fanatics, attendances are piss poor.

57 Thiago Ribeiro September 2, 2016 at 9:44 am

“It’s a joke of a tournament.”
Yet for years the IOC prevented us to take what was our by right, but now we,prevailed. You can’t keep a good country down.
“Brazil is starved of football talent, that’s why despite Brazilians being self-proclaimed football fanatics, attendances are piss poor.”
“Because we send our biggest stars to Western Europe, China, Ukraine and the Middle East in order to bring back hard currency we lack. It is a well-thought economic plan. But the national team can count on with all Brazilian great stars.

58 Deek September 3, 2016 at 5:42 am

Every country bar three or four send their biggest stars abroad but attendances still hold up. If Brazilians truly loved football the quality wouldn’t really matter. You have third tier teams in Scotland (pop. 5.2m) with higher average attendances than top flight Brazilian (pop. 200m) clubs.

As a serious question, why are attendances so bad in Brazil? I’m not buying the “biggest stars play abroad argument” as you supposedly love the game, not the players.

59 Pshrnk September 2, 2016 at 9:29 am

Cincidentally Neymar scored Brasil’s goal on a free kick in the final, and also scored the “decisive” PK for the 5-4 Gold medal victory.

60 Thiago Ribeiro September 2, 2016 at 9:49 am

All Brazilians scored their PKs, this is what Brazilians do (and the goalkeeper intercepted the last German PK). Neymar is good with free kicks, no doubt, but so are a lot of Brazilians. I, myself, happened to be great with free kicks when I was at school.

61 Bunker Brown September 2, 2016 at 8:30 pm

I was great at free kicks when I was at your school!

Next year will definitely be Brazil’s year to shine! (as it has been since…)

62 carlolspln September 2, 2016 at 5:05 am

“Tout est pour le mieux dans le meilleur des mondes possibles”

This has got to be the most vacuous, ‘just so’ post this year, AT.

And you call yourself an economist.

Good lord.

63 prior_test2 September 2, 2016 at 2:24 pm

The text was highlighted by Prof. Tabarrok, who obviously considers Don Boudreaux an economist.

64 acarraro September 2, 2016 at 5:16 am

Surely this is more down to the fact that we enforce copyright rather than supply. I see no reason to believe there are fewer great actors than great teachers. It’s just that we allow actors to charge far more than marginal production costs when showing movies under the assumption that there would be no movies otherwise…

65 Anonymous September 2, 2016 at 6:52 am

If there was an aspect to firefighting that could be copyrighted or patented, I would expect to see same kind of economics in firefighting also. There would be firefighters who are paid millions simply because they were the first ones who figured out the best hose-using technique or something and then copyrighted/patented it.

66 derek September 2, 2016 at 9:20 am

Nope. If firefighters got too expensive for the homeowners they wouldn’t pay for them. Some other arrangement would be made that the homeowners would pay for.

Up the road from me is a volunteer fire department. My neighbors practice every monday evening then go for a beer, and if there is a fire, or accident, they attend. They aren’t paid. And there isn’t any lack in supply. It is a rural area so they aren’t too busy.

67 Urso September 2, 2016 at 9:55 am

I had a professor who was a volunteer firefighter. He talked about finding charred bodies and had developed a complete paranoia about exposed wires, cigarettes, etc. Your neighbors’ experience sounds much nicer.

68 robert September 2, 2016 at 12:02 pm

Paging Ray Bradbury…

69 Pshrnk September 2, 2016 at 9:31 am

I’ll bet people have made millions on innovative firefighting equipment. But, at the moment I’m too lazy to look it up.

70 mulp September 2, 2016 at 3:30 pm

“If there was an aspect to firefighting that could be copyrighted or patented, I would expect to see same kind of economics in firefighting also. There would be firefighters who are paid millions simply ”

Copyright applies to original expression, not to words.

Every fire requires an original expression. The hoses, ladders, tankers, hydrants, ponds, breathing equipment, axes are the words. The building, wind, environment are the protagonists.

Firemen must apply physics and chemistry to engineer solutions to dynamic problems.

71 Bunker Brown September 2, 2016 at 8:31 pm

Really? I think firemen are overpaid gardeners. Point hose, spray water.

72 (Not That) Bill O'Reilly September 2, 2016 at 11:04 am

This is incorrect. Films, and those involved in making them, make money through volume rather than margin. Robert Downey, Jr. was paid $50 million for the Avengers because Disney knew that would help attract at least 5 million people paying $10 each, not because there’s some special copyright that would allow them to charge more because of his presence.

73 Govco September 2, 2016 at 1:15 pm

Disagree, without copyright there’d be 25 Avenger movies produced since the 1960s. No way a studio spends $100s of millions to make an 11th version (when was the last huge budget Shakespeare?)

Nor would they pay Downey $20m on a sequel if every studio was pumping out Avenger movies after the first success (do you know how many copycats followed 300? Ancient Greeks and Homer are not copyrighted).

(Having worked very close to these negotiations on the talent side, I feel like Hollywood still has old-timey business habits not found in industrial, tech, financial, etc. The cultural differences in compensation among sectors is an interesting convo).

74 (Not That) Bill O'Reilly September 2, 2016 at 2:40 pm

Disagree, without copyright there’d be 25 Avenger movies produced since the 1960s. No way a studio spends $100s of millions to make an 11th version

The success of big-budget Disney films based on public-domain source material (including this year’s 3rd-highest domestic gross), and attempts by other studios to mimic the strategy (including a competing remake of this year’s 3rd-highest domestic gross slated for next year) suggests otherwise.

75 Millian September 2, 2016 at 5:29 am

I don’t really think most people are concerned about entertainment superstar pay in the manner the first claim suggests.

76 Cass1an September 2, 2016 at 5:38 am

That’s exactly the type of arguments that cause people to like marxism. Where you stop at “well, such is supply, live with it and be happy” they see the paradox still unresolved and propose misguided, but clear answer “so let’s decide collectively and rationally what the demand and supply should be”.

We can do better than that, even if it requires to explain the mathematical problem of comparing two distributions (and what distribution even means) to convey the idea that certain jobs are much more unequal (and to use networks to explain WHY they are inherently more unequal) in wage distribution.

77 Pshrnk September 2, 2016 at 9:33 am

People are deciding rationally to pay Tom Brady and Tom Cruise well. Expenditure for entertainment may be the most free market we have.

78 Thor September 2, 2016 at 3:47 pm

I don’t like Tom Cruise and don’t want my money to (partially) pay him. However, I like the Mission Impossible movies. Something must give, and it does.

79 You can do better September 2, 2016 at 5:49 am

Shouldn’t they first establish that there *are* a higher number of superb educators than superb athletes? Because at the moment it looks like the argument runs as follows:

Athletes are paid more than educators. Therefore there must be lower supply or higher demand for athletes relative to educators. Therefore athletes are paid more than educators.

Rather than using a bad supply-and-demand argument, I would suggest that what’s going on here is that there’s a winner-take-all effect at play in sports and film, but not in education. But I can’t substantiate that argument because I *haven’t looked at any data*.

80 Pshrnk September 2, 2016 at 9:40 am

” I would suggest that what’s going on here is that there’s a winner-take-all effect at play in sports and film,”

Winner-take-all impacts supply. There is an enormous supply of football players, (millions in fact in High Schools and colleges), but a very small supply of potential winners of Super Bowls. There are only 1696 NFL roster positions.

81 Luis Garcia de la Fuente September 2, 2016 at 5:53 am

Movie stars earn more because they make tons of money for their employers. Their employers make tons of money because they put people to ‘sleep and dream’ from time to time, so they can forget about their miserable lives.

82 Thiago Ribeiro September 2, 2016 at 6:16 am

OK, but how doTHEY, as opposed to the studio janitor or the camera guy, make money for their employers? Why not replace them with cheaper actors? It is because they are very talented? Or just because they are famous and we want familiar faces in our movies?

83 vgfra September 2, 2016 at 7:20 am

Matt Damon can draw a crowd. Laszlo Panaflex can’t. So watch out, Laszlo Panaflex!

84 Thiago Ribeiro September 2, 2016 at 8:43 am

OK, but why can’t Panaflex draw a crowd? Is he much less talent, good-looking or handsome? What aboutnsomeonenwithnamlessmridiculous name, like Thiago Ribeiro?
Think about it this way, the selective exams for Brazilian top universities (I know the American system is different, mixing many variables, not just tests such as SAT) are so competitive, you probably could replace the n guys who got the spots with the next n guys and you wouldn’t tell the difference. If students had to bid for the places (say, by paying for the spots or accepting worse food at the university restaurant), they would totally do so– they just don’t need– if they are marginally better at the exams than the competition, the government can’t sack them and bring in more docile or less demanding students. But it is government regulation, not strict free market subject to negotiations. Why are Hollywood top actors so well-off? Are they really so better than the competition?

85 Bunker Brown September 2, 2016 at 8:33 pm

Yes, you could replace the 1st 100 guys with the next 100, things wouldn’t change, but only for a few dozen iterations. But eventually the qualify difference would start to show.

86 Axa September 2, 2016 at 7:41 am

Paying them a lot is part of the off-screen performance for the actor. Paying them a lot make them more desirable, good for dream-selling business.

87 Thiago Ribeiro September 2, 2016 at 8:54 am

This is ridiculous. People like humble, relatable people. People like soft-spoken, down-to-earth public figures like Jimmy Stewart and Gregory Peck. No one would vote for a loudmouthed billionaire who says the first thing that comes to his mind.

88 robert September 2, 2016 at 12:05 pm

Make Hollywood Great Again!

89 Thiago Ribeiro September 2, 2016 at 12:52 pm

I am sure Mr. Capra’s next movie will be awesome.

90 Pshrnk September 2, 2016 at 9:41 am

It is because they are very talented? Or just because they are famous and we want familiar faces in our movies?

Both

91 Dan September 2, 2016 at 5:54 am

This argument seems wrong. There are plenty of people who can do a reasonably good job throwing a football. Many of them play on Saturdays for a couple years and then switch to a different career because their football throwing skills aren’t in demand.

The difference between sports and firefighting is that we care a lot about small differences in skill at the high end for quarterbacks but not for firefighters. If your town has a Case Keenum caliber firefighter than you’re thrilled, even though your risks from fires are slightly higher than the other town with a Tom Brady caliber firefighter. If your football team has a Case Keenum caliber starting quarterback then you are desperately trying to trade up in the draft because you have very little chance of winning a Super Bowl until you find someone better.

92 celestus September 2, 2016 at 8:30 am

Yeah I would expect the 95th percentile of quarterbacks (NFL, arena football, college football) to make less than the median firefighter or teacher especially if you roll in benefits and pension. For actors (Hollywood, Broadway, off-Broadway, community theatre, improv troupes, so and and so on) it might be the 90th percentile.

93 Pshrnk September 2, 2016 at 9:44 am
94 Jon September 2, 2016 at 6:03 am

A much better answer: Prices and salaries are a not a moral judgment on the value of an object or a person’s work; they are the products of an economic system that has proven most effective at allocating resources and generating wealth by providing incentives to produce the right goods and services.

95 Thor September 2, 2016 at 3:50 pm

“Prices and salaries are a not a moral judgment on the value of an object or a person’s work.”

Damn shame.

96 Jon September 2, 2016 at 6:08 am

A thought experiment: What would the world be like if there were a cap on the total compensation of actors and athletes at something like 10X the median US salary and the cap covered advertising revenues? How would our lives be different? Would the average person want the cap removed so they could see slightly better athletes and movies?

97 mavery September 2, 2016 at 9:15 am

The primary beneficiaries would be the people who pay the QBs and actors. On the margin, NFL owners would be richer and, since they have a monopoly, would not increase the supply of football, so the gain is captured entirely by the owners at the expense of QBs.

For actors, OTOH, the studios would reap benefits, but you would also see an increase in the supply of movies made because studios aren’t monopolies. Depending on how big of a cost reduction this is, you may see more independent movies produced and more stars taking the time to act in those movies because the cost to them is much diminished. Because studios can no longer lure actors to play super heroes by giving them massive salaries, they’ll be more inclined to take roles they actually want/find interested because now the pay is no different. Or at least a lot more similar. For those familiar with the NBA’s salary structure, this is analogous to the phenomena of stars choosing to team up and more generally having increased discretion over where they play due to the CBA-determined maximum salary. If you’re one of the top-10 or -20 players in the league, your annual salary is basically fixed at the max. Therefore, the cost of you playing in an undesirable market vice a desirable one is greatly diminished. Moreover, if you have to take a small cut to team up with people you want to play with, its much less costly. When Lebron and Chris Bosh went to Miami, they along with Dwyane Wade gave up a small amount of salary off the max to make it work under the salary cap. Had there been no max individual salary, both of these players would’ve been giving up 10s of millions rather than a few million. So, like star actors operating under a salary ceiling opting to take an interesting role in an indie movie, they were willing to take a relatively minor pay cut to work on the project they wanted.

98 msgkings September 2, 2016 at 1:21 pm

Great post.

99 Dan Lavatan September 2, 2016 at 3:58 pm

I wonder if players would/could end up as owners (like Lemieux or Richardson, but when they agree to play). Or would you somehow require all teams to be publically traded? I’m not sure how you could prevent someone from making their own movie and borrowing money to pay for it.

100 JWatts September 2, 2016 at 11:25 am

“A thought experiment: What would the world be like if there were a cap on the total compensation of actors and athletes at something like 10X the median US salary and the cap covered advertising revenues? How would our lives be different? Would the average person want the cap removed so they could see slightly better athletes and movies?”

Another country (Britain? France?) would quickly become the country of residence for all of the highly compensated actors and athletes. Those countries would collect the tax revenue and associated trickle down money. Hollywood would start to rapidly lose importance as it’s actors would be capped at $550,000 per year, but of course directors, producers, etc would still be making millions.

101 rayward September 2, 2016 at 6:39 am

It’s all about media, and entertainment and celebrity. Tom Brady would earn a fraction of what he is paid if fans were limited to those at the stadium. The cost to transmit the game isn’t affected by whether 1,000 or 1 billion watch it. Google would be insolvent (and likely not exist) absent digital advertising, as would Facebook. Would Apple even exist if all it offered were ipods. Of course, entertainment and celebrity are all about mimicry: everybody wants to be Tom Brady (or Taylor Swift or whoever). And social media feeds our appetite to be liked, just like Tom Brady. The NFL protects its image because that’s what it sells; and the media companies are bound up with the celebrities in a mutually dependent show (which is why NBC nurtured and promoted the Olympic athletes). This isn’t criticism, just an observation. As for firemen, isn’t there a reality tv show based on firemen? And if one doesn’t exist, a reality tv show for an inner city school teacher would likely attract millions of viewers, the more outrageous the behavior of the students the better. To paraphrase Andy Warhol, everybody can be a celebrity now.

102 rayward September 2, 2016 at 6:59 am

The founders of Yahoo made the fatal mistake of accurately describing Yahoo as a media company, unlike the founders of Google who appreciated that their inaccurate description of Google as a “tech” company would be a far better sell.

103 msgkings September 2, 2016 at 1:23 pm

Regular TV would not exist absent advertising. Nor would radio. Nor would the NFL.

104 Anonymous September 2, 2016 at 6:46 am

Because out-of-control copyright allows big movie companies to extract excess profits which are partially distributed to the actors.

Although, I never understood why movie companies go along with this. Do people really pay that much extra to see familiar faces on the screen or why do movie companies hire the same expensive actors over and over again instead of using less known, but almost as good actors instead? I personally never cared that much about who is acting in a given movie. A good plot is much more important, but somehow movie writers are not as revered and well-paid as actors.

105 Bob from Ohio September 2, 2016 at 9:04 am

“Because out-of-control copyright allows big movie companies to extract excess profits which are partially distributed to the actors.”

Unless there is no copyright at all, movies will still bring in money at high levels because millions of people will go see them.

The extreme copyright term we have now has no impact on the bulk of movie income. Movies made actors and studio chiefs rich 70 years ago when copyright length was much shorter.

106 Anonymous September 2, 2016 at 5:03 pm

If copyright terms weren’t so ridiculously long, public domain movies would provide a partial substitute for newer movies. I guess this is why media industry is constantly lobbying for longer copyright terms. They are afraid of the competition from themselves from decades ago. 70 years ago the situation was very different for two reasons: 1) there were not so many old public domain movies to show even with shorter copyright terms because the whole industry was only some decades old and 2) there was no way copy and distribute movies for free like there is now.

107 (Not That) Bill O'Reilly September 2, 2016 at 11:10 am

It’s not copyright that earned Robert Downey, Jr. $50 million for The Avengers, it’s the fact the film made $1.5 billion dollars in its theatrical run. Whether the film reverted to public domain a month later or a century later doesn’t alter how wildly successful it was for the studio.

108 Anonymous September 2, 2016 at 4:56 pm

If the movie had entered public domain a month after the premiere, there would have been a sharp drop in movie ticket prices after this month because theaters wouldn’t need to pay the film company anymore to show the movie. This would have likely made some people to wait a month until they went to see the movie. Or just watch it at home for free after the month since in this world a completely legal and free alternative to Netflix that only shows movies that are more than a month old would certainly exist.

109 Ricardo September 2, 2016 at 12:58 pm

See the controversies over famous white actors being cast in period pieces that take place outside Europe or North America. Given the amount of ridicule Hollywood studios (run by supposed liberals) incur every time they do this, there must be a sense that it is nevertheless a sound business decision because it is felt that famous A-list actors — who are mostly white — will bring in more revenue for the film. The latest example is a film about the Mongol invasions of China — starring Matt Damon(?!).

110 gorobei September 3, 2016 at 7:00 pm

“Although, I never understood why movie companies go along with this. Do people really pay that much extra to see familiar faces on the screen or why do movie companies hire the same expensive actors over and over again instead of using less known, but almost as good actors instead? I personally never cared that much about who is acting in a given movie. A good plot is much more important, but somehow movie writers are not as revered and well-paid as actors.”

Simple risk reduction? I’d prefer to spend $50M + $20M on actors for a $50M profit than to spend $50M + $10M on actors for a 90% chance of a $60M profit. First case I have a career, second case I risk being unemployed. At the blockbuster level, it’s not about acting skill (everyone has that,) it’s about showing up for work on time, not tripping over the furniture, and being sober enough to execute.

111 KM32 September 2, 2016 at 6:50 am

Most of being a movie star is about being attractive and having connections. Acting skill is not nearly so rare as top-shelf quarterbacking talent. Just go to your local semi-professional theater company and see what kind of talent there is in nearly every town in the country. Acting simply is not that hard to learn.

112 byomtov September 2, 2016 at 9:50 am

This is an important point. There are in fact lots of very fine actors, as there are very fine singers, etc. Getting o the top is a combination of luck, skill, and, overlooked in importance, family connections.

Why do the studios pay so much,then, when they could hire others for less? The simple answer of course is that the famous actor is more productive – generates more revenue for the studio. But don’t stop there. Push on. How did they get to be famous? Well, by getting personal publicity and appearing in highly publicized films. In a sense the studios create the situation.

Market the hell out of a movie, and maybe it is successful, and then the star, or an important supporting actor, becomes famous, and in effect captures part of the benefit of the studio’s work in the future.

In other words, it is always useful to be very careful about what being “productive” means.

113 Urso September 2, 2016 at 10:05 am

Perhaps paying high salaries to a few acts as a “brass ring” that lures thousands of wannabe prom queens from Des Moines and Bunkie to become Los Angeles waitresses while working for their big break. In other words, paying a few actors a lot ironically depresses the wage of average actors, because it increases the supply.

114 John B. September 2, 2016 at 6:51 am

Wrong. In the examples used, the important factor is the scalability of distribution. In a scenario where all education is online and doesn’t need individual attention to students, you’d see teacher pay and supply resembling that of the actors and athletes, right? The distribution of skill level is not that ‘we’re blessed with superb teachers and firefighters,’ but rather we have a mix of ability. Whereas we’re only watching the very top tier actors and athletes on our TVs.

The importance we place on firefighting and teaching doesn’t have anything to do it.

115 BenK September 2, 2016 at 7:13 am

This is my +1. Scale is the major factor here. There are plenty of unpaid or poorly paid actors and so on, but because it scales, the few that are fortunate (or sometimes, better) crowd out all the rest and absorb a huge fraction of the sector. Firefighters are much less able to scale.

116 derek September 2, 2016 at 9:13 am

I think it is unfair that Broadway actors need to sing the same songs every night. Don’t they have recording hardware yet?

117 Slocum September 2, 2016 at 6:58 am

Boy the crowd around here is getting surly. I do agree with Don Boudreaux and Alex that a better understanding of the economics of teachers vs film stars is needed, and this is a reasonable start on that. But I think the argument as given doesn’t really work. Sports and entertainment are weird because they are ‘lottery professions’ where a very few are paid large sums while the masses make little or nothing. If we look at sports or entertainment as a whole, it’s far from clear that the average actor, musician, or athlete makes more at his or her craft than the average teacher or fire-fighter — depending upon who we count, the reverse is true. Certainly the *median* K12 teacher does much better than the median musician or athlete. Varsity high-school sports teams are full of gifted athletes who fans have cheered and enjoyed watching, and many would love to have eventually gone pro. And they’re much further to the right in the athleticism distribution than their aspiring teacher classmates are in terms of academics (who, unfortunately, tend to be quite average). So the idea that there is only a small supply of athletes who are any good (or good enough to perform in front of crowds) is wrong. Yet only a tiny fraction of those athletes will ever make a dime playing sports. Some because they never make it to the top and others because there’s little or no money to be had at top of their sport (water polo, lacrosse, crew, etc). But ironically (given the topic) the number of people making money playing music or football is actually dwarfed by the number who make smaller but more predictable incomes as music and football teachers (coaches).

And Boudreaux shouldn’t assume that Tom Brady and Jennifer Lawrence got to where they are because of pure merit — in both cases there was a lot of luck involved. Brady was a good-but-not-great college quarterback who had some trouble holding onto the starting job at Michigan and was famously a late round draft choice. If Drew Bledsoe hadn’t gone down with an injury when he did, Tom Brady might never even have gotten the chance to start in the NFL. And what if the ‘Hunger Games’ franchise didn’t exist or Jennifer Lawrence had lost the part to Hailee Steinfeld (no, I hadn’t heard of her either until just a minute ago)? Would Steinfeld now be the star and Lawrence the lesser-known?

Well, that’s all a bit of rambling, but I think the key thing here is to understand the differences between normal and lottery professions, and Don Boudreaux doesn’t touch on that.

118 Pshrnk September 2, 2016 at 9:49 am

Sports and entertainment are weird because they are ‘lottery professions’ where a very few are paid large sums while the masses make little or nothing

And why are they lottery professions? HInt—scalability.

BTW, a note on scalability. If a lottery was restricted to a town of 700 people due to remoteness and lack of technology, the winner would not be collecting a multimillion dollar prize.

119 Otto von Doom September 2, 2016 at 8:19 am

The number of people served by a Jennifer Lawrence movie assuming a $10 movie ticket is something like 67 million (for Hunger Games) of course that gets split up with a bunch of other actors and production crew, but in basic terms, this is the scale of the group providing her pay. The number of people served by a school teacher is about 60 (counting the kids’ parents).

120 KevinH September 2, 2016 at 8:26 am

How about living in a world where there is more demand for education than entertainment.

121 derek September 2, 2016 at 8:45 am

How are you going to create that world? Maybe kill a few million Ukrainians, or kill anyone who wears glasses. Or kill the entertainers.

I know. Limit distribution of entertainment goods to a small local area. Divide every city into blocks of 50,000 people, and an entertainer cannot go outside that area. They cannot distribute their art outside of the area. That would keep those scum from making too much money.

122 Urso September 2, 2016 at 10:08 am

I do see a lot of “support local music” bumper stickers. Haven’t seen any death squads though.

123 Bob from Ohio September 2, 2016 at 8:59 am

Every child in the US goes to school. Education is at maximum demand already.

124 hgfalling September 2, 2016 at 9:33 am

Googling quickly I find BLS says the US spent $2500 per household on entertainment:
http://www.bls.gov/opub/btn/volume-4/movies-music-sports-entertainment-spending.htm

Apparently there are 125 million households, so that’s roughly $300B spent on entertainment.

while NCES says the US spent $11,700 per FTE of elementary/secondary school (and much more for college):
http://nces.ed.gov/programs/coe/pdf/coe_cmd.pdf .

Adding up some numbers here for 1-12 education, I get about 50 million students:
https://www.census.gov/prod/2013pubs/p20-571.pdf

which suggests about $550B spent on primary and secondary school alone, not counting kindergarten, college or any other kind of educational demand. So maybe we live in that world already?.

125 JWatts September 2, 2016 at 11:31 am

“How about living in a world where there is more demand for education than entertainment.”

That’s already the case.

126 Howard September 2, 2016 at 8:31 am

Demand for surgeons is also quite high. Yet they make a lot more than teachers, if not as much as Tom Brady. Meanwhile, demand for people who can eat insects very rapidly is much lower than demand for firefighters. How much does a competitive bug eater make?

It’s very odd to see an economist argue price almost purely from supply.

127 Bunker Brown September 2, 2016 at 8:37 pm

The supply for surgeons is artificially limited by a limited number of spots in medical school, and then in residency. If the USA started to give foreign surgeons (from reputable countries not U of Ouagadougou) the right to practice, then surgeons would start to earn less. A lot less.

Teachers, OTOH, are pumped out by many, many schools and there is no artificial cap on their number.

128 Tom September 2, 2016 at 8:52 am

Of course, this analysis assumes the definition of “actors” is – the highest paid, most successful actors and not how the Screen Actors Guild defines the term.

129 Edward Pierce September 2, 2016 at 8:55 am

Surely, in a world where sports and movie stars are paid a pittance due to their superfluous contribution to our well being, we would still find teachers and firefighters living in squalor. After all, the vast majority of our money should clearly go to the water company, and our (local) farmer.

130 Bob from Ohio September 2, 2016 at 8:57 am

“most people are troubled that the likes of Tom Brady and Jennifer Lawrence earn far higher pay than does any firefighter or school teacher. ”

Really? I don’t think this is true.

Movie and sports stars have made a lot of money for decades. Babe Ruth made 100K when the average income was $1,300. Carol Lombard had a big house, nice car and furs and diamond back in the 1930s.

131 Thiago Ribeiro September 2, 2016 at 10:03 am

Homer Simpson: Now here’s your biggest problem of all
Mel Gibson: The filibuster scene? That was Jimmy Stewart’s favorite.
Homer Simpson: And it was fine for the 1930s, the country was doing great back then. Everyone was into talking, But now, in whatever year this is, the audience wants action, And seats with beverage holders, – But mainly action.

132 Reader September 2, 2016 at 9:03 am

Why does a lottery winner makes more money than a mid-level worker? It is not about inherent talent in playing the lottery, supply of said talent, or demand for said talent. Its about a certain organizing structure that allows for a lottery to exist in the first place, collect money from a multitude (ie scale), and redistribute some of the proceeds in ways that are agreeable to everyone involved.

In other words, technology is obviously important (allows for scale), but also copyright laws, professional licensing rules, anti-union regulations, the intricate rules of ownership and draft surrounding the NFL (and other activities), and so on. It’s about power, not supply & demand.

133 So Much For Subtlety September 2, 2016 at 9:07 am

By a coincidence the news was just reporting that the Chinese government is going to take action to limit the salaries paid to actors.

I do not expect Chinese films to get worse. But then I don’t expect the limits to work.

134 derek September 2, 2016 at 9:09 am

Behind this question is the assumption that Jennifer Lawrence is taking money from teachers and firefighters.

The better question is why don’t we pay teachers $10 million a year. Or firefighters? Maybe those 30 kids could each put $15 in the pot, and some Marxist incantations will expand it into $10 million.

British Columbia has a large number of volunteer fire departments, a thriving home schooling environment, and a very effective volunteer search and rescue volunteer organization.

135 Andrew Swift September 2, 2016 at 9:14 am

In private industry, employees are paid based on their contribution to the bottom line of the employer.

So a film star or soccer star is paid very highly because they bring in a lot of money.

In the public sector, people are paid as much as is needed to hire the necessary staff.

136 Ricardo September 2, 2016 at 9:35 am

“In private industry, employees are paid based on their contribution to the bottom line of the employer.”

This is true if and only if there is a highly competitive labor market where there are multiple employers who can and do compete for the exact same set of services from an employee. The very best employees who sign non-compete agreements or who work in highly specialized occupations where there may only be one or two employers who really need their services can’t expect to reap their full marginal products of labor.

137 DZ September 2, 2016 at 9:21 am

Demand is relatively high for all of the careers mentioned here. Scale explains the economics at work for the salaries and partly explains the cost to the end consumer. The only reason athletes and actors can draw in so much is because their access to a larger consumer base allows the price to end consumers to be much lower. Acting skills are highly subjective so the success of actors depends on consumer preference. There are plenty of generic products out there, but many fail to become popular because consumers are loyal to certain brands. When you combine scalability and consumer loyalty you end up with actors who draw in higher salary from employer competition. Athletic prowess is more measurable so consumers only desire seeing the best or the up and coming best, leaving a low supply with high demand and widespread access.

Without scale, driving up the salary of firefighters and teachers is not possible since it would have to be done through the price to end consumers. Firefighters will never be able to scale (to my comprehension) and so high demand and elastic supply (skills required for firefighting are abundant relative to professional athletes) will ensure the service is forever cheap and firefighters paid low salaries.

138 Spotted Toad September 2, 2016 at 9:26 am

I’ve often wondered how much lower, as a percentage of the population, are the numbers of people making a living as an actor or artist now, versus previous eras before the age of mechanical reproduction.

Another question is whether we get worse actors or artists now that there is only a need for a few superstars. This could be because working professionally at a craft is a good way of learning it (and relatively few people get that opportunity) or because the criteria for becoming a superstar are relatively orthogonal to talent.

139 msgkings September 2, 2016 at 1:44 pm

“….or because the criteria for becoming a superstar are relatively orthogonal to talent.”: this is obviously true, as the careers of Ben Affleck and Julia Roberts attest.

140 Willitts September 2, 2016 at 9:28 am

For an argument that takes only a paragraph or two, this isn’t awful. It certainly skirts around the most important issue of economics: marginal valuation. Actors and athletes make tons of money because the services they provide are valued by millions of people, each willing to pay a substantial sum to be entertained by them for a few hours.

Firefighters seldom fight fires. They are also very highly paid although not as high as an actor or athlete.

Teachers are also very well paid although they probably earn at the low end for a college graduate. This is because they are a dime a dozen. I’m sure that millions of people plucked from the street could do a capable job teaching if they were forced to do so.

Both of these groups are unionized, implying they are both OVERPAID relative to their marginal revenue product. Furthermore, the opposite side of the bargaining table is occupied by people (politicians) who are only indirectly interested in the welfare of the people who actually pay these salaries (taxpayers).

141 Bunker Brown September 2, 2016 at 8:38 pm

Football players are also unionized.

142 Robert W. McCall September 2, 2016 at 9:28 am

It’s far more simple than this horsecrap.

Firefighters and teachers are paid by our government which is always trying to pay the least while taking the most for themselves whenever possible.

Movie stars are paid by for-profit corporations who mostly cater to the least common denominator within human beings who would rather lose themselves in a fictional fantasy than confront the ever-mounting problems facing our world and society.

What’s the common denominator? That both are run by folks who value money over humanity, the shallow now over a better future, self over others.

143 Thiago Ribeiro September 2, 2016 at 10:11 am

“That both are run by folks who value money over humanity, the shallow now over a better future, self over others.”
Those folks are called human beings.

144 Willitts September 2, 2016 at 9:29 am

Didn’t we solve this with the Diamond-Water Paradox?

145 byomtov September 2, 2016 at 7:28 pm

I think so.

146 libert September 2, 2016 at 9:38 am

Scale is important, I agree, but there’s another major difference: political economy. Firefighters and (for the most part) teachers are both government jobs, where wages are set administratively and not by standard supply and demand factors. Governments set firefighters’ wages, private sector set athletes’ wages. And the private sector tends to pay better than the government.

147 The Other Jim September 2, 2016 at 9:39 am

>earn far higher pay than does any firefighter or school teacher.

Better question – who the hell equates firefighters with school teachers?

148 Thiago Ribeiro September 2, 2016 at 9:54 am

If not for school teachers, how would firefighters know that water puts out fires? I learned it at school and it changed my life!

149 Urso September 2, 2016 at 10:10 am

Hope you never run into a gasoline fire.

150 Thiago Ribeiro September 2, 2016 at 10:12 am

Why should I? I use ethanol.

151 JWatts September 2, 2016 at 11:34 am

Did your school fail to cover the fact that ethanol also has a lower density than water?

152 Thiago Ribeiro September 2, 2016 at 12:08 pm

I don’t remember to have been provided with the complete list of substances with a lower density than water, but they probably mentioned ethanol. So what? Ethanol doesn’t provoke gasoline fires, it is a well-known fact in Brazil.

153 Lord Action September 2, 2016 at 12:08 pm

For that matter, ethanol will keep burning even with the addition of quite a lot of water. Nor do traditional foams work well. Fighting ethanol fires is a developing area, thanks to biofuels.

154 Thiago Ribeiro September 2, 2016 at 12:49 pm

If American short-sighted protectionism hadn’t wrecked Brazil’s sugarcane fuel exports, we probably would have a great solution by now. Or maybe we can move on to invisible methanol fires:
https://www.youtube.com/watch?v=uvK1AicyGGw
https://www.youtube.com/watch?v=Ku7TdLeEGsQ

155 Urso September 2, 2016 at 10:00 am

In 1969 the average NFL salary was under $200,000 (in today’s dollars). Now it is about $1.9 million. Obviously the country had an oversupply of competent football players in the 1960s.
http://www.usnews.com/news/blogs/press-past/2013/02/01/us-news-questioned-pro-footballs-future-nearly-45-years-ago

156 Thomas September 2, 2016 at 10:54 am

Urso-
As with any fat-tailed (Pareto distributed) financial or economic metric, averages are biased, non-robust and misleading. The better comparison is to real (not nominal) median salaries. The next big factor to introduce into any observed increase in NFL player salaries is the impact of television on sports, which has been huge.

157 Floccina September 2, 2016 at 10:45 am

I think it is more relevant that people like me, as far as I can asses, spend next to nothing Tom Brady and Jennifer Lawrence get no money from me (maybe some tiny amount I do occasionally watch pro football and see ads but I rarely buy the advertised products). I have spent and am taxed much more for teachers and probably much more for firemen even though we do not need as many as we have now.

It seems to me that we are lucky that beyond some moderate level of ability additional teaching ability does not make much difference.

Also it seems to me that entertainment is very important to humans beings. You see falling apart shacks with 60/month satellite or cable TV. EVen in Honduras it is surprising how poor a person will fork out for TV.

Further my interactions in my youth with heavy drug users led me to believe that they are seeking to escape boredom by using, meaning that they are willing to risk health and life for entertainment. Also look at those medieval cathedrals with the stained glass and it seems great music for very poor people.

158 Thanatos Savehn September 2, 2016 at 10:48 am

Fire suppression is a very big business and the CEOs of its leading companies are paid handsomely (sometimes too handsomely, see e.g. Dennis Kozlowski). Those companies have long been about disrupting the business of firefighting by suppressing fires before firefighters have a chance to arrive in time to fight them. If new homes and new cars were to come with fire suppression systems firefighters would be reduced to rescuing cats from trees. Doesn’t sound like a market failure to me.

159 prior_test2 September 2, 2016 at 2:34 pm

‘new cars were to come with fire suppression systems firefighters would be reduced to rescuing cats from trees’

Recognizing I cut out the part about houses, you do realize that it is quite uncommon for firefighters to deal with burning cars anywhere except in Hollywood movies, right?

On the other hand, firefighters have a lot of experience in tearing apart crashed vehicles in a fashion that allows any occupants still alive to have the opportunity to be delivered to a hospital.

160 Thanatos Savehn September 2, 2016 at 11:23 pm
161 Albigensian September 2, 2016 at 10:53 am

“Didn’t we solve this with the Diamond-Water Paradox?” And that, surely, is a better explanation.

That, and mechanical reproduction (film, video, sound recordings) made it possible for an entertainer to entertain an enormous audience, whereas no similar amplification exists to multiply the efforts of a firefighter. With the result that a small number of entertainers can aggregate the small payments of a huge large number of fans into substantial riches.

(And, although the market for teachers is still more like the market for firefighters, the technology of online learning may push push the market for talent in teaching in a similar direction).

162 ashby September 2, 2016 at 11:20 am

Entertainers (actors and team athletes) make a small amount of money from their millions and millions of fans. Teachers require a large amount of money from the tens of people they directly influence each year. When teachers can reach millions of students for pennies each… you get KhanAcademy.org, etc.. Immeasurably better than any math teacher I had in grade school and free!

It’s all about scale.

How many teachers are there in the US right now? A million? Some are very good, but many are undoubtedly beyond mediocre. In twenty years, I expect much education will have moved online. Few people will be willing to pay for mediocre lecturers. (Unmotivated math teachers with indecipherable accents will have vanished.) The best lecturers will be in very high demand and will be paid like the rock stars they are, because they will effect millions of students, not twenty or thirty kids.

We’re heading for an exciting time for the best teachers.

163 Floccina September 2, 2016 at 11:32 am

So far people judge that a fairly competent teach in a class with 30 students of so is better than a great teacher remote.

164 ashby September 2, 2016 at 12:03 pm

Being able to directly interact with your instructor is valuable, but ultimately the “flipped curriculum” is going to take over e.g. watch one of the ten best instructors in the world in a recorded presentation of the material (with animated diagrams and examples), then discuss in class with the best your local educational facility can offer.

Live Q&A is important, but not nearly as important as clarity and excellence of presentation.

165 wiki September 2, 2016 at 11:32 am

I’m shocked that an economist like Boudreaux would pen this. It has more to do with the nature of the winner take all competition for acting than the supply of actors vs firefighters. Arguably there are MORE good thespians and would-be thespians out there than good firefighters. But many of those are willing to work for free or prefer day jobs to punishingly low chances of making a living. Nonetheless, community theater and the prevalence of good actors working as waiters suggests that many enter the profession hoping for that big payoff to — mostly — disappointment.

His letter teaches very poor economics.

166 ashby September 2, 2016 at 11:55 am

Or maybe the argument would be better framed as:

There are millions and millions of basketball players in the US. The thousand or so top players are paid very well because they are watched and followed by tens of millions of fans. High visibility and a great deal of demand for their services by deep pocketed employers.

There are millions of teachers/mentors/writers in the US. A few write books or movies available to millions of fans. They can do very well indeed. Most, however, teach only a few hundred or thousand students. Their remarkable skills go largely unrecognized save by their few students and there isn’t (at present) a great deal of competition for their services. So I see a three fold problem- lack of discoverability. We probably don’t know who all the very best teachers are. Lack of scale. Lack of competition for their services.

The internet is changing scale and discoverability. A few of my superb art instructors have set up a site with videos of their lectures. Charge a small amount of money (much less than the amount charged by a top notch art school) to a much larger number of students. KhanAcademy.org for math. This site for economics lectures, etc.. As these online scaled learning academies increase in scope and number, we’ll begin to see competition for the best talent and the money will begin to follow. Cal Tech and MIT and Harvard should be recording their best lectures. Would you rather learn physics from Richard Feynman or Joe Shmoe who barely passed but is available to teach at your local college?

167 Bunker Brown September 2, 2016 at 8:41 pm

As long as Joe Shmoe can help me understand something I am stuck on.

168 Ashby September 3, 2016 at 4:10 am

That’s why you need Joe Shmoe there to answer questions, but the lectures and coursework ought to be designed by the very best minds in the field. This is only an incremental step from using textbooks by the best. Now they’ll be able to lecture too.

169 Josh K September 2, 2016 at 1:35 pm

There are many, many more talented actors and musicians than there are famous actors and musicians. The scarcity is about marketing and branding, and about how people like to relate to musicians and, especially, actors. There isn’t any reason for a content producer with its own brand (say, HBO) to spend a premium on hiring a currently famous actor. The only real value add amounts to “I want to go see the new Brad Pitt movie.” This is one reason that as cost of producing video continues to fall technically, I suspect we’ll see more and more and more niche programs. The barrier is production costs, not acting.

For musicians, I suspect the problem is more about our dependence on peer choices for discovering new artists, and the difficulty for individual musicians in finding an audience. Hunger/persistence is at least if not more important than talent.

170 Paul Johnson September 2, 2016 at 1:51 pm

The Economics of Superstars.
That”s it.
I am surprised that he gave a wrong answer, especially since the right one is more interesting and more useful to students (average is over.)

171 John B September 2, 2016 at 6:08 pm

Yes. Exactly.

172 Chris September 2, 2016 at 1:53 pm

The argument is flawed. The reason isn’t that we don’t have enough good athletes or entertainers. It’s that those industries by design only have a select few employees and therefore operate under a very different dynamic where the winner takes all. In other fields, you rarely need “the absolute best”. You need a certain standard, but once that standard is reached, it doesn’t matter – so the labor pool is still large and compensation reasonable.

At least on the sports level, the # of elite athletes available for pro sports is small. But that is because each pro sports league has 30 teams or so, so they pick only the cream. There are lots of good athletes, but after college they can’t play simply because they are only fractions less talented. If every town had its own NFL or NBA team, then all these athletes could find jobs, the pool would be diluted, and the huge salaries of the star players would decline considerably. Without a team filled with other super-elite athletes, Tom Brady likely doesn’t look as good. He’d still be seen as a good player, but probably not worth his current salary because he couldn’t win Super Bowl after Super Bowl if there are 1000 NFL teams and the entire NFL talent pool is distributed across that.

Hollywood though is different. Their selection process is less meritocratic than sports because there aren’t comparable statistics for the arts or strict measurements. Jennifer Lawrence is a good actress, but I don’t believe there aren’t any others just as “good”. Can we really say she is that much better to that unknown actress working as a waitress in some LA restaurant in the same way Tom Brady is better than his old college QB peers? Probably not. The reason Lawrence got the job for the Hunger Games and not the waitress was probably due to a lot of factors, which while possibly relevant also include stuff that had nothing to do with true merit. Nevertheless, once she got her break, she’s now able to get roles the waitress will never have the opportunity to apply for.

While some very few actors and actresses can carry a movie entirely by themselves – their participation alone will get many fans to buy tickets – most actors and actresses, no matter how good, will fill seats by just their name alone. Any number of their peers would do just as well filling seats. Marvel Studios knew that people showing up wanted to see the characters, not any particular actors playing them, so they were fine with casting relatively unknown or at least commercially unproven actors who had good skills as they could sign them up for possible long term deals very cheaply (Downey in the first Iron Man was not considered to be a blockbuster star, but a former promising actor who almost destroyed his career with drug abuse). They’d then cast other recognizable actors in smaller roles to make it legit (especially A list actresses who while well known could not carry movies).

Honestly, if some studio wanted to do a sabermetrics type analysis on which actors or actresses truly fill in seats and therefore worth the cost, then they’d probably find very few do, and they could then cast according to a lowest cost denominator and churn through a lot of promising or mid-tier actors to keep costs down while still producing excellent movies. The same thing could be said for CEOs. Very few are worth the outlandish pay as any number of similarly skilled and experienced people do just as well. They do deserve high pay, but studies have shown that very few actually substantially increase shareholder value. However, the hiring system for these professions are very different than what occurs for most people, and therefore the system is rigged to a degree.

173 Josh K September 2, 2016 at 2:12 pm

I’ve always wondered why this hasn’t happened yet, it’s so obvious just walking around LA. TV seems like a more promising venue for this that movies (at first), given the smaller risk. Netflix/Amazon/Hulu seem well positioned to make lot of medium/low budget niche content playing to very specific tastes.

174 Lord Action September 2, 2016 at 3:19 pm

Arguably, YouTube is closer to this model. They don’t even hire people, they just pay for results.

And if you want a channel on, say, historical European swords, there’s a very good one and a couple of competitors.

175 static September 2, 2016 at 2:49 pm

I don’t think this is right. It’s more about the difference between selling products and selling services of human labor. Intellectual property laws allow the work of an actor to be redistributed and resold many times, whereas the work of an individual firefighter can only be sold once. The actor makes more money because the movie is sold many times, and they are key to the sales. Since there are a small number of movies that sell many times, and the “brand” of the actor has a large impact on those sales, they are key to creating that value, and thus can demand a high salary to lend their brand to a film.

If we want to play analogies, it might be better to look at the actor in a community play as analogous to the community firefighter. The actor in a local theater can only entertain the number of people in the theater that night, just as the firefighter can only protect a small community with their skills. A movie is more like fire alarm and sprinkler system that can be designed once, and sold many times. (and in digital form, the unit production costs are near zero)

The sports analogy is interesting as well. I think there is another aspect here where the market in firefighters is lacking in competition. While people highly value great sports stars because they can help their team defeat the competition, hiring the very best firefighter doesn’t provide a similar advantage. If you look at something like the winners of events at the world firefighter competitions, they don’t actually help your firefighting unit get more business than another firefighting unit. Having the top sports player on your team can help you win the championship, get prizes, increase merchandise and ticket sales, advertising revenue, and the sale of rights to the games.

Yet another way of looking at it though, the median sports participant and or actor probably makes less than the median firefighter.

176 Edgar September 2, 2016 at 4:11 pm

The catechism of the Roman Catholic Church disposes of this argument nicely.

With respect to the firefighters and teachers: “A just wage is the legitimate fruit of work. To refuse or withhold it can be a grave injustice. In determining fair pay both the needs and the contributions of each person must be taken into account. ‘Remuneration for work should guarantee man the opportunity to provide a dignified livelihood for himself and his family on the material, social, cultural and spiritual level, taking into account the role and the productivity of each, the state of the business, and the common good.’ Agreement between the parties is not sufficient to justify morally the amount to be received in wages.”

With respect to athletes and actors: “Love for the poor is incompatible with immoderate love of riches or their selfish use: ‘Come now, you rich, weep and howl for the miseries that are coming upon you. Your riches have rotted and your garments are moth-eaten. Your gold and silver have rusted, and their rust will be evidence against you and will eat your flesh like fire. You have laid up treasure for the last days. Behold, the wages of the laborers who mowed your fields, which you kept back by fraud, cry out; and the cries of the harvesters have reached the ears of the Lord of hosts. You have lived on the earth in luxury and in pleasure; you have fattened your hearts in a day of slaughter. You have condemned, you have killed the righteous man; he does not resist you.’ St. John Chrysostom vigorously recalls this: ‘Not to enable the poor to share in our goods is to steal from them and deprive them of life. The goods we possess are not ours, but theirs.’ ‘The demands of justice must be satisfied first of all; that which is already due in justice is not to be offered as a gift of charity.’ When we attend to the needs of those in want, we give them what is theirs, not ours. More than performing works of mercy, we are paying a debt of justice.’ … … Among all these, giving alms to the poor is one of the chief witnesses to fraternal charity: it is also a work of justice pleasing to God: ‘He who has two coats, let him share with him who has none and he who has food must do likewise. But give for alms those things which are within; and behold, everything is clean for you. If a brother or sister is ill-clad and in lack of daily food, and one of you says to them, ‘Go in peace, be warmed and filled, without giving them the things needed for the body, what does it profit?'”

http://www.vatican.va/archive/ccc_css/archive/catechism/p3s2c2a7.htm

Wage differentials would appear to be entirely irrelevant. The only substantive question facing any wage earner is whether or not they are putting their just wage to just use. An altogether superior summing of the moieties than anything economics will ever provide.

177 Thiago Ribeiro September 2, 2016 at 5:27 pm

https://books.google.com.br/books?redir_esc=y&hl=pt-PT&id=FI3WAAAAMAAJ&dq=inauthor%3A“%2C+Frei+Betto”&focus=searchwithinvolume&q=”Rich+man
The page 249 bit is quoting the thought (or purpots to represent the thought) of a saint, but I don’t recall which one, I read the book about twenty years ago at my school’s library.

178 Kevin September 2, 2016 at 9:51 pm

Boudreaux’s sense of what is going on in the world of celebrity is laughably inaccurate. The scarcity exists in our heads. People have a limited ability to develop attachments to people they don’t know, even charismatic ones, and sustain them over a period of time. Becoming a celebrity actor begins as a fight for attention and exposure, because there are hundreds of people who can do the exact same job as well as you can. The higher paycheck for established actors is a function of celebrity — a branding effect — the actor’s ability to be a known quantity to would-be movie goers. It’s a weird business. My main point is that firefighters are paid because they are selling skills, but celebrities trade in mental real estate, it’s not really about skills (although some can certainly be helpful down the road).

179 xyzcycx September 3, 2016 at 6:07 am

Here’s another way to frame about this argument that I think is a little bit more relevant: Why are teachers in the US paid so poorly and given so few of the benefits that teachers in other rich, Western democracies receive? Why have US states repeatedly slashed education budgets even as the US economy continues to grow? It’s certainly not a question of supply and demand, since demand is always going to steadily rise as the population goes.

180 Ivo September 4, 2016 at 3:41 am

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 e.g. 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 by interviewers or if they were better at ‘interviewing’.

Corollary: jobs are usually not performed by those most capable of performing them. If they are, part of the most capable will be 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 linked brief 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.

181 BradK September 4, 2016 at 6:55 pm

It’s so hard to make ends meet on a paultry $300K/yr…

http://transparentcalifornia.com/salaries/search/?q=firefighter&y=2015

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