Mom Can I Have That?

"Why do athletes and movie stars get paid so much money?"

You're tempted to say:
"Because they're greedy."

Dr. T's Rx:

That may be so, but it doesn't do much to advance your child's knowledge of labor economics. It may be hard to accept the fact that sports stars earn more than teachers, but it isn't hard to explain.

It's just a simple matter of supply and demand for workers. There's a big demand on the part of team owners and fans for top players, but there's a very limited supply of Michaels, Shaqs and Hakeems. So their salaries are bid up. There's also a demand for teachers, of course, but many more people are available to fill those positions, so school districts aren't forced to bid up their salaries as high (nor could they afford to).

Don't forget, though, that despite the glamor and the money, sports and movies are high-risk businesses. Team owners and movie producers expect superstars to more than pay for themselves by selling tickets. If a movie bombs, a star becomes a has-been. If a player is injured, his value plummets. Even if he stays healthy, he can be washed up by age 35.

In economic terms, players try to "maximize their income" before they're fully depreciated (used up) as an asset to their team. In other words, they try to make hay while the sun shines.

Dr. Tightwad Explains...