Tiger Woods Makes How Much??

“I can’t believe that America pays athletes and movie stars so much!”

The presumption in this statement is that “America” is some single entity that has decided it values athletes more than police or teachers and that if only “America” changed its mind, this could somehow be “fixed.” However the reality is that in economics, having an available substitute usually drives prices down. For example, despite the importance of Police Officer Smith’s job, he is far easier to replace than Michael Jordan. The same can be said for teachers, nurses, firemen and even soldiers. In most cases, there is no shortage of applicants possessing the necessary skills to fill these important roles.

The movie-star effect is also a product of mass media. There are two ways to get rich: bring a million dollars’ worth of value to one person, or bring a dollar’s worth of value to millions of people. When an actor’s effectiveness was limited to the number of people you could fit in a single theater, their economic position was similarly poorer. Once they were able to bring their performance to millions of people through movie reels, their value and wealth increased dramatically.

So, why are athletes paid so much? Because you, me and millions of other people are willing to pay a few dollars for their performance, and that adds up. But when someone complains about their salaries, what are they suggesting? Are they willing to launch a campaign to convince millions of people to stop paying to watch sporting events? Or are they suggesting that by fiat, dictate or some other law we should place a cap on how much we value those individuals?

I’m often torn on whether people who make such statements are simply ignorant of basic economics or truly desire to wield power over others to bring into existence their own world view. I’d prefer to think it’s the former.