It does not matter which economic theory you subscribe to, well actually in the long run it does, but that is another topic for another time. All economic theory rests on this one principle.
People, this includes you and I deliberately undertake specific actions with the goal of making their situations, at least as they see them, better than they were previously. Think about that for a minute. We go to work in the morning. Why? To make money so that we can improve our lot in life. We go back to school, not just for fun, but to get ahead.
The study of economics is the study of human nature. I bet you never learned that in school. By starting with this principle in mind, it becomes a little easier to see why people behave the way they do in various situations. It also allows us to understand a little better how certain economic actions bring about certain results.
Lets take for example a comment made by the president in his State of the Union Address. Bush said that we are falling behind in the areas of math and science. His plan calls for government funding to encourage more students to choose one of these two career paths. Once again we see that the government believes that they have the best answer to solve a problem that may or may not exist.
Lets apply the above principle to this problem. Our sons and daughters make decisions based on the idea that those decisions will in some way better their lives. It may only look better to them. Value after all is subjective not objective. One of the big motivators in choosing a career path is money. The better a career pays, the more students choose the career. After all, more money means a higher standard of living, right?
If we look at good paying jobs we can see where students are going: law, $109,478; business, $79,931; biological and biomedical sciences, $63,988; mathematics, $61,761. What determines those salaries? Market demand. Plain and simple. The more demand we have for lawyers, and believe me there is demand for more lawyers, then the higher they are paid. Why do doctors make so much? Our education system restricts the number of students allowed in the medical programs. In other words, our medical schools are creating the shortage of doctors in order to keep incomes high.
What kind of demand do we currently have for mathematicians and scientists? Not much. There just aren't that many openings in business and industry. Most people in these professions end up teaching. And why do we have such low salaries in the teaching fields? All together class, high supply of teachers. Very good.
So the president wants to spend money to encourage students to pursue a career in math or science so we will have even more people in these fields and no jobs for them. Salaries will drop even more and fewer students will choose those fields of study. A vicious circle it seems.
So what is a government to do? I have a simple suggestion. Why don't we let the free market determine the number of scientists and mathematicians we graduate? As demand rises, salaries will increase and the number of graduates will increase until we reach equilibrium. It is a wonder system if we would just let it work.
Isn't economics wonderful?
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