Catching up on our backlog of simple economics question, we have this 1995 letter to the New York Times from Professor Jay Pasachoff.

It seems odd that you choose to put an article on your June 12 front page that some college professors in Nassau County, Long Island, make more than $100,000. In view of the fact that Michael Ovitz, Hollywood’s top deal maker, just turned down a job with a $250 million salary, some 2,500 times more, and that new lawyers fresh out of law schools earn close to $100,000 from major New York firms, the real question may be why other professors don’t earn more than they do.

The question still remains why university professors should make so much less than comparably trained individuals in other professions.

Professor Pasachoff was kind enough to teach me basic astonomy 20 years ago. Allow me to teach him basic economics.

In a free society, your wages are determined, for the most part, by supply and demand. If there are a lot of people willing and able to do what you do, your wages will be low. If there are many firms eager to hire people like you, your wages will be high. Baseball shortstops are paid a lot of money, not because they spend years slaving away in graduate school, but because a) there are very few people who can do what they can do (hit major league pitching) and b) there are many teams (firms) that want to hire them.

There are complexities involved, of course. One reason that baseball players are so well paid is that it is relatively easy to judge their talent and measure their marginal contribution to the success of the team. The output of college professors can not be measured so easily.

But the key point is that there are thousands of people with Ph.D’s who would love to teach at places like Williams. The demand for college professors, at least at elite schools, is mostly fixed, but the supply is large and growing. Why should Williams offer someone $200,000 to teach when it can find dozens of excellent candidates willing to do the same job for $75,000?

Now, the fact that getting a Ph.D. involves years of effort does restrict the supply of professors. If a Ph.D. were quick, there would be tens of thousands of smart people who would want to teach at Williams! Even with the impediment of graduate school, there are still too many people chasing too few jobs.

And why is that? Why do so many people (like me!) get a Ph.D. in hopes of being a college professor when they could make more money (with the same training time) as a lawyer or doctor? Simple: Being a professor is much more fun than these jobs.

Supply and demand.

By the way, how many Williams faculty make more than $100,000 per year? I would guess at least 50 and more likely 100.

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