Winner Take All Jobs
Some jobs are “Winner Take All”, meaning the very best people in those jobs make far more than the average person either working in the job or trying to. Some examples are actors, musicians, athletes, writers, lawyers, and drug dealers. Psychiatry and history might be good candidates when you consider the ratio of students to professionals, but I think many students realistically don’t expect to get a job in the field they study.
People are bad at estimating very low probabilities, and are often overly optimistic about their own chances for success. Kids are often encouraged when they are young to go after high status low probability careers like sports stars or astronauts. While there is something cool and romantic about that, basically none of them will fulfill their dreams. Even if people realize the probabilities and make a rational decision, there will still be thousands of failures for every success. You can’t hedge your bets when you go after a field like that either. Since the winner has to be the very best, anyone who doesn’t give 100% effort is bound to fail.
When being 10% better means 10% more pay, mediocre workers can still draw decent salaries. If winner take all jobs become commonplace and only the best .01% of people can even make any money at all, inequality is bound to increase significantly. It’s not a straightforward proposition to say therefore a large amount of redistribution is feasible. Someone who produces a huge amount of value to the economy may be highly moble and hence have an elastic supply of labor. Britain in the 1960s and 1970s exported a large number of its talented people to America simply because they had a 95% income tax.
When you think about inequality, it’s important to consider which segment of the population you care most about. Inequality has increased a lot lately, but most of it has been the 1% getting much richer; it’s not that the lowest 5% have done much worse relative to the middle 50%. I have a pragmatic view of income and wealth. It’s not the number of dollars per se that is important, it’s the lifestyle it allows you. Warren Buffett drinks the same coke that the poor do, and they both surf the same internet.
I’m skeptical of claims that fancy cars and houses add to subjective well being. These days it seems like the super rich spend an increasingly large percent of their wealth on philanthropy. Would the government spend that money any more wisely? Should I be jealous of Bill Gates because his name is attached to a cure for malaria and not mine? I just can’t get excited about stuff like that. I think it is far better to focus on making sure the very poor and disadvantaged get a decent place to live and enough food to eat than wringing ones hands about whether a rich person has 50 or 100 Lamborghinis.
I’m not even sure how I would advise a child trying to decide on a career. It’s important to have dreams and work toward them, even if you don’t always succeed. My risk preference would not match theirs, so who am I to try to influence their choice? The world needs people to take big risks because the rewards often benefit all of humanity. Great scientists and artists have works which can be enjoyed by millions of people. As luck plays a huge role, even the failures add something to society in the statistical sense. I don’t really have a conclusion, but I think it’s an interesting thing to think about.